All staff sacked in $16m company collapse

Australian customers have been left out of pocket by almost $7 million, but the chain’s collapse also resulted in verbal and physical abuse.

EXCLUSIVE

A retailer with stores across the east coast of Australia collapsed after racking up an incredible $16 million in debt with customers owed almost half of the money.

Johnny’s Furniture had operated 14 stores across Queensland, New South Wales and Victoria.

But shockingly the collapse led to alleged theft and verbal and physical abuse of employees, according to a bombshell report to creditors which was leaked to news.com.au.

When the company collapsed, there were approximately 84 employees and the business continued to trade after administrators were appointed on June 4 as they sought to sell it.

However, despite employing security guards, staff were subject to “verbal abuse”, “physical violence”, customers unlawfully entering stores and “customers stealing goods following expressing anger over orders having not been fulfilled”, according to the report.

“The above has understandably resulted in stress leave and resignation submissions from employees,” Ben Fletcher from Westburn Advisory wrote in his report to creditors.

Johnny's Furniture went into administration leaving lots of angry customers. Picture: John Gass

During that period, the administrators also managed to make a net profit of $208,000 for the business despite the Commonwealth Bank of Australia pulling facilities to take credit card and contactless payments before a long weekend in NSW and Victoria in June.

But on June 26 the business was shut down permanently as no one came forward to buy it and administrators increasingly faced alarming issues.

The move left dozens of workers jobless and customers out of pocket without their orders.

The report revealed customer claims had added up to a whopping $7.9 million and trade creditors were out of pocket by $6.4 million.

Employees are also owed close to $2 million in unpaid entitlements, the report said.

Statutory creditors include the ATO, which has an outstanding bill of $538,000, alongside NSW, Victoria and QLD state revenue offices with combined debts of almost $100,000.

The administrators pointed to a number of issues for slamming doors shut.

Johnny's Furniture angry customers. Picture: Art

These included the threat of the Office of Fair Trading issuing a public warning regarding trading with the company, “which would have a further negative impact on the company’s brand and revenue”.

“Following customers becoming aware that outstanding orders would likely not be fulfilled, I expected an increase in verbal abuse and physical violence towards security guards and/or employees from customers and an increase in resignations and annual leave submissions from employees,” Mr Fletcher.

Johnny’s Furniture collapsed due to a number of reasons, according to the report, including “poor cash flow and high cash use”, “poor management” and a “lack of sufficient working capital to service debts”.

“(A) significant increase in operating costs and decrease in revenue due to Covid-related trade stoppages and consumer spending habits resulting in trading losses,” he said.

There was also the opening of new stores when the company was not in a financial position to service the correlating increase in costs, the report added.

Screenshot from Johnny's Furniture website taken June 13, 2024.

Mr Fletcher noted that in late 2023 the company was in a poor financial position and it sought to recapitalise the business through debt or equity financing, but it incurred significant trading losses during the past financial year up until June 2024.

“During January and February 2024, the company’s trading results worsened and attempts to

seek debt finance to fund working capital requirements, the purchase of new stock to meet

existing customer orders and purchase new stock, were unsuccessful,” the report explained.

Then in March 2024 in an effort to further reduce rent expenses, the company exited its QLD based distribution centre, with stock moved into the QLD based stores and the new NSW distribution centre.

But things only got worse from there. It then closed its NSW Marsden Park store in May, as well as the North Lakes, Oxley and Chirnside Park stores in QLD, as well the South Morang and Narre Warren stores in Victoria.

Johnny’s Furniture also closed its Victorian distribution centre in April with stock moved to NSW as it was required to be out of the site by 24 June.

“Stock movements at this time became disorganised and poorly documented due the speed at which stores were being closed and the time frame to exit the relevant distribution centres,” the report said.

Relationships with certain landlords also “deteriorated” to the point where some were threatening to take possession of premises in early May.

“Irreversible damage” was caused to the brand including an “increase in aggression from customers towards employees, significant reduction in sales and increase in employees taking annual/sick leave” after A Current Affair aired a story about the failure to meet orders or process refund requests, the report said.

Johnny's Furniture at Bundall which has gone into administration leaving lots of angry customers. Friday June 7, 2024. Picture, John Gass

The administrator noted he was attempting to recover $150,000 from a CBA bank account from sales generated by Johnny’s Furniture, although the major bank is claiming its owed $374,000.

He also noted in the report that the director of Johnny’s Furniture had recently incorporated Home Furnishing Group Pty Ltd but had been advised that this entity does not hold any assets and has never traded.

The company had also become embroiled in a number of civil court cases due to furniture allegedly damaged during delivery, an alleged faulty lounge, an outstanding debt of $6700 and an unfair dismissal claim which was later withdrawn, the report revealed.

It also showed the extent of the collapse with administrators having to deal with a whopping 7500 parties regarding the collapse and responded to over 2000 inquiries.

The next creditor’s meeting will be held on July 10 where administrators have recommended the company be placed into liquidation.

Originally published as All staff sacked in $16m company collapse