QBE axes its protection for suppliers of Myer, David Jones
Insurance giant QBE will no longer offer protective policies to suppliers of Myer and David Jones, suggesting it is concerned by the department stores’ financial viability.
Business
Don't miss out on the headlines from Business. Followed categories will be added to My News.
A major insurer will no longer protect suppliers to Myer and David Jones against bad debts from the department store chains in a sign it is deeply concerned about their financial health.
QBE Insurance, one of the nation’s biggest insurers, has stunned Myer and David Jones by moving to exclude them from its trade credit insurance product.
Trade credit insurance provides protection to a supplier in the event a buyer — in this case Myer and David Jones — is unable to pay its debt.
If Myer and David Jones were unable to pay a supplier, or entered voluntary administration as part of a process to restructure their businesses, QBE would be required to cover the debts owed to suppliers who held its trade credit insurance.
QBE’s decision comes after it carried out a review of the retail sector that concluded the business models at Myer and David Jones — two of Australia’s most famous retailers — were unsustainable in a post-COVID world.
The review questioned whether the department store chains would be able to carry out the restructures needed to produce viable businesses.
Myer and David Jones have laboured for years to meet the challenges of an influx of international competition, the rise of online shopping and an expensive and expansive store footprint rooted in long-term leases that would be expensive to break.
“While we appreciate this is a difficult time for these two retailers, we believe this is a prudent course of action in the current market conditions,” QBE said in a statement on Friday.
“We have advised both Myer and David Jones of our willingness to continue to review our position as and when further information about market conditions becomes available.”
QBE’s exclusion will come into effect on July 16.
Both Myer and David Jones rejected the insurer’s assessment of their businesses and the department store sector.
Myer said in a statement: “We obviously don’t subscribe to QBE’s view around the future of department stores.
“Whilst disappointing, we don’t believe they provided substantial coverage over Myer’s business.”
About 3 per cent of Myer’s suppliers are believed to hold their trade credit insurance with QBE.
Myer said it had not changed its payment terms to suppliers during COVID-19 and would continue to pay them according to agreed terms.
“We will continue to work with our suppliers in delivering suitable commercial terms with or without trade credit insurance sitting in the middle,” it said.
David Jones said it had worked closely with its suppliers during the pandemic and was well positioned given it kept its store open during the shutdown,
“We disagree with QBE’s assessment and will continue to work closely with any affected suppliers,” it said.
“While insurers have adjusted their risk parameters globally in response to COVID-19 this doesn’t change our focus on delivering for suppliers, our customers and our team for the long term.”
QBE’s decision came as the latest data from the Australian Bureau of Statistics showed retail sales rebounded a record 16.3 per cent to $28.83 billion in May as coronavirus-related restrictions were eased.
Trade had plunged by a record 17.7 per cent in April.
MORE:
MYER TO OVERHAUL WOMENSWEAR RANGE
Originally published as QBE axes its protection for suppliers of Myer, David Jones