Close to 2000 retail workers are facing unemployment just one month out from Christmas after Payless Shoes went into administration on the same day receivers announced the shut down of Pumpkin Patch.
One of the biggest independent shoe retailers in Australia, Payless has 131 stores around Australia, 870 staff and annual sales of about $75 million.
Ferrier Hodgson said it was too early to identify the primary cause of Payless’ financial difficulties and the business would continue to trade while the administrator considered the best way forward.
Administrator Jim Sarantinos said Payless Shoes was one of the best-known independent shoe retailers in Australia and the company’s board of directors had appointed Ferrier Hodgson as voluntary administrators.
“We are immediately calling for expressions of interest for a sale of the business as a going concern,” Mr Sarantinos said.
“Employees will continue to be paid by the administrators and it was expected that employee entitlements will be fully covered from the assets of the company.”
Payless was founded in 1980 but it hit some rough terrain in 2013 and after a period in administration it was sold to the US Payless ShoeSource
No such white knight emerged for kids’ clothing chain Pumpkin Patch and receiver Korda Mentha has announced stores will start closing.
Receiver Brendon Gibson said all stores would remain open until the end of December but the restructuring of Pumpkin Patch’s head office would occur immediately, resulting in the loss of 63 jobs this week.
“Our focus since Pumpkin Patch entered receivership in October was to sell the business as a going concern,” Mr Gibson said.
“Unfortunately, while the brand is attractive, the business itself ultimately drew no interest at the conclusion of the sale process.
“We now move to the next phase of the receivership, which is to sell off stock and begin winding down the business.”
In late October, Pumpkin Patch’s management said there was virtually no value left after discussions with its lender, ANZ Bank New Zealand, faltered.
In a statement at the time, chairman Peter Schuyt and managing director Luke Bunt said despite the efforts of the board and management, it had become evident that “no solution was available to the company to address its over-leveraged and significantly capital constrained position”.
Pumpkin Patch posted a full-year loss of $15.5 million for fiscal 2016, during which time its debt to lender ANZ increased to $46 million from $39.1 million.
About 1000 staff work in Pumpkin Patch’s network of 117 stores in Australia, and about 600 in its 43 New Zealand outlets.
Pumpkin Patch trades in the cut-throat mid-range market and Retail Doctor chief Brian Walker said Pumpkin Patch got caught in competition with successful discount operators like Kmart, which could produce similar lines at a lower price point.
He said it was a similar story for Payless Shoes, which hit its peak when chains like Kmart, Target and Big W didn’t have big ranges of cut-price shoes.
“For functional buys, consumers tend to look to value chains like the successful discount department stores and for anything more they want something experiential or aspirational,” Mr Walker said.
Online Source: The Sydney Morning Herald.