Retailers slide into consolidation in the New Year

footwearIt’s only week one into the New Year, though consolidation, administration and diversification appear to already be the mainstay themes for retailers in 2018. 

On Monday, footwear, clothing and accessories label Diana Ferrari (DF) announced the closure of all its stores, though will maintain an online presence. 

Munro Footwear Group (MFG) – which acquired Fusion Retail Brand’s stable of brands including Williams, Mathers Colorado and DF last year – said the group had decided to exit the brand from apparel and focus on footwear following a strategic review of its retail brand portfolio. Instead, MFG will turn DF’s focus to its core business and “objective of being Australia’s best footwear company”.

All DF-branded stores will be closing over the coming months while the current spring summer 17/18 collection will be its last.

“This was a difficult decision because Diana Ferrari retail and its apparel division have been solid performers with a loyal customer base and staff dedicated to a high level of customer service,” MFG CEO Jay Munro told IRW. “However, focusing purely on footwear across all MFG brands is the right strategic decision for the company in the current retail landscape.” 

“Our strength and heritage is in managing footwear brands and it is important to position the company to maximise its potential and return.”

Munro said DF was an iconic Australian footwear brand and that its full range of footwear will be available online plus in Williams and Mathers stores, while all retail staff will be offered continued employment within the existing 280+ MFG store network. 

Another firm hits admin

While the DF brand lives on, another homegrown favourite’s future is less certain.

After operating for 35 years, homegrown plus-size retailer Maggie T has recently entered administration, appointing insolvency firm DW Advisory last week. Cameron Gray and Justin Holzman were appointed joint and several voluntary administrators with the first meeting of creditors to be held next week. Represented by legendary model Maggie Tabberer, long an ambassador for the brand, the retailer operates 28 stores nationally and has an e-commerce platform.

It becomes the latest retail casualty, with many Australian retailers in for a bumpy ride during 2018, according to insolvency firm Jirsch Sutherland.

Marcs, David Lawrence, Herringbone, Rhodes & Beckett, Howards Storage World, Topshop/Topman, Surfstitch and Oroton Group were the high-profile names to have appointed administrators in 2017.

A long time coming

Andrew Spring, partner at insolvency specialist Jirsch Sutherland said although there is a cyclical element to retailers continually entering administration, the bigger story is centred on the development of the sector.

“It’s the realisation of what’s been coming for a while in terms of just finding the right balance for retailers between their bricks-and-mortar sales stream and their ecommerce sales stream,” he told IRW.

“Those businesses that are struggling or ultimately ending up in an insolvency are the ones that have been a bit late to the party in being able to get that balance right or they’ve tried and failed.”

The festive trading, said Spring, is particularly difficult due to the historical challenges of getting stock purchasing correct and lining up with sales over a busy period.

“There are also the additional challenges of having more competitors in the same space by virtue of the online environment,” he said. “Everybody’s trying to grow their own revenue by exploring different ways to get to customer bases.”

While retailers may be accustomed to having a particular geographical market under control, competitors from outside that space are tapping into retailers’ local patch of customers through the online environment, which Spring said is a challenge for retailers who have relied upon their bricks-and-mortar stores as their essential marketing activity because of their location.

Speaking on whether high rents are adding to the retail pain, Spring said landlords have not drastically changed their mentality over the years.

“If you’re complaining about a high rent, then you’re pitching yourself against parties who are in that geographical location and have got a similar type of concerns. But then that’s when we talk about finding the balance between where your revenue is generated,” he said.

“If you’ve got a person in another geographic location at a lower rent being able to ship to your customers and tap your customer base when you’re paying higher rents, then obviously it throws out your cost ratios, so that’s really a challenge,” he said.

“Anyone that’s highly leveraged in geographical locations that do have higher rents are going to feel the pinch, so there is that challenge of diversifying where your business is operating to take advantage of market conditions around rents and sales.”

Spring said we can likely expect to see more retailers entering administration throughout the year, due to a combination of factors, including the natural business lifecycle for some.

“As the whole marketplace has changed, there will be those people in the industry who haven’t been able to keep up with what it now requires to be successful,” he said.

 

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