Shockwaves have been sent through the retail world this week, with yet another two fashion companies going into administration. Herringbone and Rhodes & Beckett are the latest fashion victims.
Warnings have arose that there could be more Australian fashion retailers, that could go broke and call in the administrators this year.
Upmarket mens and womens clothing chains Herringbone and Rhodes & Beckett will do exactly that this week, and this follows other local brands including Marcs and David Lawrence, who hit the brakes last week after faltering under the weight of almost $30 million in debt. If this is anything to go by, there are more to come. Last year saw Pumpkin Patch and Payless Shoes go broke.
Banks are trying to make decisions on weather to keep on lending to them or weather to pull the pin. Fashion retailers going into administration is one story where the numbers don’t really tell the full picture, according to Ross Greenwood on The Today Show’s Money Minute this morning.
In December last year, Australians spent more than $ 2 billion on clothing and footwear. That’s $140 million dollars, or 7.3% more than the Christmas period last year, according to Greenwood.
“If you go back 10 years, Aussies are now spending 45% more than they did in 2006. Technically, rag traders should be ok. But sales does not always mean profit, and businesses need profits to survive.”
Rising wages and overheads are one problem. Competition is the other issue. Greenwood says the introduction of new international players in fashion retail, including Uniqlo, Zara, H&M and Topshop , with more planned to shore up, means Australian consumers are buying more clothing at cheaper prices, and local retailers aren’t doing very well to keep up. For the last quarter of 2016, inflation has fallen for clothing and footwear.
Herringbone and Rhodes & Beckett have refused to comment on the size of its debts. Both brands, owned by German luxury apparel maker Van Laack, have been trying to negotiate the sale of its businesses for months now.
Between the two, there are 29 stores and 140 staff in total. Administrators Cor Cordis have advised they are assessing which stores to shut down, based on losses and cash burning, and will be working to deploy staff from these stores as fast as it can.