Zensu and RMK shoe business collapses, owing $4.8 million, as experts predict further retail pain
Thursday, January 25, 2018/
Administrators appointed to the company that produces the RMK and Zensu shoe brands say they are working with distributors to provide them stock, after the business became the latest to feel the intense pressure of Australia’s current retail climate.
Matthew Jess and Ivan Glavas of Worrells Solvency and Forensic Accountants were appointed as voluntary administrators to the brands’ parent company, Cadet Shoes Proprietary Limited, on January 10.
The company, which employees 37 staff and turned over $10 million last year, produces, manufacturers and distributes the RMK and Zensu shoe imprints to stores across Australia, as well as selling directly through an online store.
Speaking to SmartCompany, Worrells partner Paul Burness said administrators are now in discussions with the retail outlets that take the company’s stock.
“We’re trying to assist with providing stock to the distributors, and right now we’re only aware of about a dozen of them,” Burness says.
The online store for the brands is currently not in operation, with the administrators’ “current focus to sell through retail stores”, Burness says.
However, that doesn’t mean the online offering won’t be reopened down the line, he says.
Creditors of the business are owed $4.8 million, with around $460,000 of this owed to local creditors. International creditors are reportedly owed $350,000, with employee entitlements accounting for the rest of money owed.
On Wednesday, Burness told Fairfax administrators are consolidating the business ahead of looking to sell the operation as a going concern.
“One or two mistakes” can be costly in challenging conditions
David Gordon, retail expert and executive director of Kepler Analytics, says the fact Australia is seeing retail collapses so early in 2018 suggests this year will be challenging for companies in a different way than before.
Women’s clothing retailer Maggie T entered voluntary administration in early January, while other footwear and clothing brands have made strategic moves to consolidate their operations. The owner of the Diana Ferrari brand has decided to close all of the brand’s bricks-and-mortar stores and end its clothing line, but will continue to footwear through an online store and its existing distribution network, while outdoor clothing company Mountain Designs has announced a downsizing of its store network.
Chinese New Year is occurring late this year, while the Easter trading period is early, says Gordon. This makes it challenging for brands because they would have had to have already paid for and secured their stock orders for the next quarter by January, and many are struggling with cash flow.
“A lot of them just don’t understand the basics, and continue to trade and do things like they’ve always done but they do not have a proper sense of cash flow in the strategic sense,” Gordon believes.
In this climate, it doesn’t take much for a retail business to fall on hard times simply by failing to plan for when they will have to order and pay for stock, he says.
“Even one or two mistakes, together with the stress [of the conditions]” can lead to intense challenges, he says.