Ferrier Hodgson report lays bare reasons for Topshop Australia collapse

A NEW report into the collapse of Topshop Australia has laid bare the slew of problems that conspired to bring the chain crashing down.

Topshop Australia founder Hilton Seskin, pictured here at one of its stores earlier this decade, was hamstrung by an “unfavourable” franchise agreement, administrator Ferrier Hodgson has found.

A NEW report into the collapse of Topshop Australia has laid bare the slew of problems that conspired to bring the chain crashing down.

And it reveals the Commonwealth Bank is set to be hit with a bad debt charge of up to $8.1 million over a loan to the failed fashion import.

The report into the $30 million collapse of Topshop and Topman in Australia has blamed its downfall in part on poor decisions by its British parent, including trying to push out-of-season stock onto shoppers here.

Among the key reasons for the collapse identified by administrator Ferrier Hodgson are “counter seasonal product issues due to the Arcadia ‘stock-push’ franchisee model”.

Topshop Australia founder Hilton Seskin, pictured here at one of its stores earlier this decade, was hamstrung by an “unfavourable” franchise agreement, administrator Ferrier Hodgson has found.

Arcadia is the multinational fashion empire backed by British billionaire Sir Philip Green whose stable of brands includes Topshop and Topman.

The Australian arm operated as a franchisee housed in a company called Austradia, whose directors included Rebel Sports founder Hilton Seskin.

Ferrier Hodgson also singles out an “unfavourable” franchise agreement between Austradia and Arcadia as also dooming the fast fashion import to failure amid fierce competition from rival foreign retailers H&M and Zara.

This included charging high franchise fees that inflated Austradia’s cost base, meaning it was “unable to offer price points which appealed to the target customer base”, the report notes.

Macca’s take.

The Australian arm of the high-profile fashion import does not escape criticism, with Ferrier Hodgson saying it pushed ahead with a rapid growth strategy despite sales going backwards.

It was also late in rolling out an online shopping portal, the report says.

The CBA was Austradia’s biggest lender, owed $12.1 million through a secured loan at the time of the group’s collapse in May.

Ferrier Hodgson says secured creditors could expect to receive 33c to 39c back in the dollar, meaning the CBA would have to write off $7.4 million to $8.1 million.

Employees will receive their full entitlements but unsecured creditors will receive nothing.

The CBA recognised $1.1 billion in bad debts for the year to June.

Administrators found Topshop’s parent company favoured other markets, dumping out of season stock on Australia. In this picture, taken last month, a model wears a Topshop creation in a runway show in London — the chain’s home market.

A spokeswoman said the bank did not comment on individual client matters.

The Australian Topshop arm opened its first store on Chapel Street, South Yarra, in 2011.

Alarm bells at the CBA started sounding mid last year when it breached various loan conditions.

The bank carried out a strategic review of the business at the start of this year and it was put in voluntary administration late in May after Arcadia said it was unwilling to provide any further financial assistance.

Creditors to Austradia are set to meet on October 18 to consider the administrator’s report and decide whether to appoint a liquidator and wind the company up.

Ferrier Hodgson said it had not identified any business practices that needed to be reported to the corporate cop, the Australian Securities and Investments Commission.

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