Surfstitch.com Talks on Voluntary Administration

Catching up with online surfwear retailer Surfstitch.com recently was an eye opener to what the business has been going through following the recent announcement that its holding companies had gone into voluntary administration.

On 24th August 2017, SurfStitch Group Ltd announced it had gone into voluntary administration having been beleaguered with several legal issues, including two class actions, an investigation by corporate watchdog ASIC and litigation as well.

“A lot of people jump to the conclusion because we are associated by brand name to the holding companies (SurfStitch Group Ltd and SurfStitch Holdings Pty Ltd) – we wore a lot of flack from this which was unnecessary because we aren’t in fact in administration. We have traded strong since we started this journey way back in 2007 and we are still trading well as a business today,” says David Dennings, Surfstich.com’s general manager of regional technology and infrastructure.

Dennings says says that one of the main focuses for it (following the voluntary administration announcement), not just for its internal staff but also its external stakeholders including its partners, has been making sure there is an understanding that it is “still a good strong profitable business – it’s the holding group that’s in administration, not us”.

Surfstitch management have been focused on keeping its internal staff laser focused on the trading business, according to Dane Patterson, general manager of marketing at Surfstitch.com. “We are about to enter the busiest trading period of the year, like any other retailer, being the peak season of November through to December, November in particular, being an e-commerce business.”

From an internal staff perspective, Patterson says the mood at Surfstitch.com has been “pretty good” and it has been business as usual, explaining that communication with staff has played a major role in maintaining a positive company culture. That, as well as keeping good news at the forefront of discussions.

“The key to it has been communication. There has been a lot of open transparent communication from a senior management point of view. We have almost weekly business updates for the whole team to keep everyone abreast of the (voluntary administration) process and being transparent as to what is going on, but also we’re sharing some of the small wins that we’re having at the Surfstitch Australia trading brand, for example, we’re having a really strong September and we’re looking to finish really strong on our numbers.”

Surfstitch Australia says it’s also been wading the waters of the negative impact of the holding company’s voluntary administration by keeping its team focused on the strategic initiatives the retailer has in place. “We’re still spending money. We’ve got some really big exciting strategic initiatives that we’re working on and keeping the team abreast on these things has been important,” says Patterson.

“So really, the core of it has been communication. In this environment, communication with staff is vital – people can tend to become unmotivated and a bit concerned about their job security and that sort of thing, but there has been openness and transparency which is key,” adds Dennings.

Surfstitch.com also says it hasn’t seen a downturn when it comes to consumer trading data. “From a customer point of view it’s been pretty good to be honest. The everyday Surfstitch consumer isn’t concerned with the corporate going-ons of the holding group. So from a traffic and a sales point of view, off the back of those major announcements – that didn’t affect our customer base at all,” says Dennings.

“We’ve got a loyal customer base – we have over one million email subscribers, we’ve got hundreds of thousands of social media followers and we have over a million visitors to our website each month, and that hasn’t wavered. So I guess that has been the strongest thing for us, that customers have continued to support us. There’s been the odd customer that have been deep in shareholder forums that have questioned whether their gift cards would be valid, but it’s been pretty rare from a customer point of view.

From a partner point of view Patterson says they have been more cognizant about it, “because they’re in the industry and they read those articles.

“There has been some management with those partners but the administrators (FTI Consulting) have provided us with good support to enable this process – our company is still solvent and its business as usual. We’ve been able to manage any of that negativity that has come from partners,” explains Patterson.

“We’re not just paying our bills – we’re buying big for peak so we’re ready to trade strong for peak which is important,” adds Dennings. “We might be a pureplay retailer, but by dollars spent, compared to many of the big name bricks and mortar stores, we’re turning over more volume than they do.”

Following the most recent update from the company, the administrators of the Surfstitch Group are taking proposals for the deed of company arrangement which will be assessed and forwarded to the creditors of SurfStitch Group Ltd and SurfStitch Holdings Pty Ltd for review and to vote on, with a preference to go down the path of a restructure as opposed to liquidation.

Surftich.com says it hopes to continue to trade strongly and hopes that its does so within a structure where it has got financial support but none of the “financial detractors” from the Group. “Because we’ve sold off parts of the business that have been non-profitable, we look forward to being a leaner more profitable business which continues to grow and establish itself within the niche in which we operate.”

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2 thoughts on “Surfstitch.com Talks on Voluntary Administration

  1. Good article which explains the difference between a holding company and the trading company going into administration. This is what was missing in the mainsteam media when this was reported a month or so ago. Well done!

    Reply
    • David
    • 2nd October

    It’s interesting how Surfstitch.com is trying to separate itself from Surfstitch Group. Surstitch is the ‘Group’s’ main source of revenue. If Surstitch Group goes down, Surfstitch.com goes down. The can try to spin it all they want but, when your company is only valued at $20M and you have a $100M lawsuit looming (and the associated ongoing legal fees, which are substantial), it really doesn’t matter what your sales are. If you’re thinking of giving Surfstitch gift cards (or frankly even buying holiday gifts that may need to be returned), I wouldn’t have much confidence in buying from Surfstitch at this time. You’ll notice that they mentioned that customers have had questions about their gift cards being valid, but the didn’t actually give you an answer as to whether or not they would be.

    Reply

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