Questions are looming over the latest company announcement by embattled Australian fashion brand, Ksubi, and its secretive parent company, Bleach Group. This week the financially troubled Bleach Group confirmed it has secured further backing from its LA-based financial investor, Breakwater, and will relocate its operations to the US. The news follows Bleach Group’s ongoing supply chain woes, a major company restructure, and Ksubi’s receivership in late 2013, which led to a mass redund
ancy of 60 local staff.
The ongoing saga culminated on Thursday last week, when the company unceremoniously closed and gutted all of Ksubi’s Australian stores, as broken by Inside Retail.
Inside Retail PREMIUM can report that Ksubi’s store staff were informed of the store closures that morning, and were simply told they would no longer be paid for services.
Documents accessed by Inside Retail PREMIUM show debts into the several millions, including $66,000 to landlord Frank Knight, almost $100,000 to Melbourne Central, and $121,000 to Westfield.
It also owes $110,000 to the Australian Tax Office (ATO), and Bleach Group is understood to owe more than a year’s worth of superannuation to its former head office employees.
Ksubi and Bleach’s wholesale youth fashion brands, Something Else and Insight, which together form the largest part of its business, will also relocate to the US following the Breakwater investment.
Breakwater was first linked to Bleach Group in 2013, when the parent company liquidated both Bleach and Ksubi, and restructured the businesses to another entity following Chinese supply chain issues.
This week, trade media reported that the company had been “snatched from the fire” by the Breakwater deal, and will now focus on global growth as part of a wider company initiative.
“We are now in the process of assembling a world class management and a mix of new and existing creative design teams to expand the reach of these brands globally,” said a company announcement.
“We are focusing on Europe and North America as core markets for strengthening these labels, while Australia will continue to remain the labels’ vibrant founding location.”
Administrator, Vincents Chartered Accounts, refused comment to Inside Retail PREMIUM, and it is unclear if, or when, creditors will see money owed.
A former Ksubi and Bleach employee, who is owed $5000 in superannuation by the company, says they feel it’s unlikely they will ever see any money.
“It’s hard to even know what company it is that owes us this now. We’ve all been left in the dark,” the source, who wished to remain anonymous, told Inside Retail PREMIUM.
Where the problems started
Ksubi was launched as a denim brand in 2000 and went on to gain cult status and international exposure, with its avant- garde street designs worn by the likes
of supermodels Miranda Kerr and Nicole Ritchie.
It was founded by Sydney designers George Gorrow, Gareth Moody, and Dan Single, who are no longer involved in the business.
Ksubi was purchased by Bleach after the streetwear brand first hit financial woes in 2008. As of mid-2013, Bleach still owed almost $2.8 million to Ksubi’s secured creditor, Westpac.
Inside Retail PREMIUM understands the company’s woes became substantial around a year ago and were linked to issues with Bleach’s Hong Kong investor and manufacturer, Jams.
It is believed Jams extended Bleach significant credit on manufacturing, which eventually led to a major lack of cash flow for the business.
Other major factors in the company’s woes included struggling wholesale clients, with the company understood to have faced unpaid bills by retailers during the tough trading conditions of 2012.
In early 2013, Bleach began making open internal plans for an IPO in the US market, as broken by Inside Retail PREMIUM in August last year.
The listing valued Bleach Group at $15 million and indicated the company required funds to acquire Ksubi’s stores, which operate under a franchise agreement, and open new concepts.
It is understood the IPO was shelved following issues with cash flow and management disputes, and Bleach and Ksubi subsequently entered voluntary administration in mid-2013.
The companies were liquidated and the assets moved to another entity, with help from a new and then undisclosed major stakeholder based in the British Virgin Islands.
Sources told Inside Retail PREMIUM that Breakwater had been in talks with Bleach before the voluntary administration, but it was reluctant to invest at the time due to the significant debt.
Breakwater’s latest deal with Bleach took place after Ksubi closed its doors last Thursday, which allegedly happened without the knowledge of Breakwater or Ksubi’s investment company, Veritas Advisory.
Inside Retail PREMIUM spoke to Veritas Advisory last week following the store closures, and was told the company had no knowledge of the hasty decision.
It is unclear what will happen to Ksubi’s Australian outlets. It now has barren stores in Westfield Sydney, Melbourne Central, Chapel St, Brisbane’s James St, among others.
The brand had also temporarily ceased trading via its online store, but has now reignited the e-boutique and appears to be selling Ksubi’s old stock on the website at significant discounts.
Inside Retail PREMIUM understands there are now just six employees working at Bleach’s Rosebery, Sydney headquarters, which housed more than 70 staff in the group’s golden days.
Bleach’s main fashion brand, Insight, is not currently operating via its online store. Inside Retail PREMIUM understands the website was shut down after the company failed to pay for its web domain.
The former Bleach Group employee told Inside Retail PREMIUM that the whole experience has “obviously left a sour taste, but overall it’s just sad”.
“There aren’t that many Australian companies left for young creatives to work for and this is another one down the drain.”