‘Not a great look’: Co-op Bookshop administrators reach deal over $500,000 worth of hats from CEO’s company

Collapsed retailer Co-op Bookshop is facing tough questions about mysterious payments of more than half a million dollars in the lead-up to its demise.

As Co-op Bookshop was nearing collapse and nervous suppliers were owed millions in outstanding invoices, a company controlled by its CEO was receiving hundreds of thousands of dollars in payments for leather hats.

Jacaru Australia, a Gold Coast-based company controlled by Co-op chief executive Thorsten Wichtendahl, received more than $857,000 in payments from the retailer this year.

Some of that money was for goods not yet delivered, even as other suppliers including textbook publishers and toy sellers were waiting to be paid for products already sitting on shelves.

The iconic campus retailer, which also owns 63 Curious Planet stores, was placed into voluntary administration on November 24 owing $16 million, blaming weak retail trading figures and a “collapse” in textbook sales.

Administrator Phil Carter from PwC told The Sydney Morning Herald last week that investigating the payments to Jacaru would be “one of the critical jobs of the administrators” and that he had “a lot more questions than answers”.

Speaking to news.com.au following a packed two-hour creditors meeting in Sydney on Wednesday, Mr Carter said he had been expecting questions about the payments so he “took the decision to deal with it on the front foot”.

“We have done some work on that,” he said.

Under an arrangement struck with Jacaru just before the meeting, Co-op will sell as much of the remaining Jacaru stock as possible over Christmas and keep the profit.

Co-op will then return anything left over to Jacaru in January for a full refund.

The administrators have brought down the original $857,000 figure to $500,000 “through a combination of reconciling, some refunds and cancellation of orders”, Mr Carter said.

“Five hundred-thousand effectively represents what was ordered (and) what’s been delivered,” he said. “Broadly that number represents every order that’s ever been placed (starting) in May. It’s a year’s worth of orders.”

Of that, $150,000 worth has already been sold, leaving about $350,000 worth of physical stock still in stores. “There’s basically $6000 worth of stuff in each store,” Mr Carter said.

“Given it’s already in the stores, it’d be quite an expensive exercise to collect and send it back. The agreement I’ve struck with Jacaru is effectively a consignment arrangement.”

PwC’s priority over the Christmas period is to stabilise the business and trade profitably so it can be sold as quickly as possible. Investigating what went wrong will come after.

“I’m saying (to Jacaru), ‘Before we get into the ‘going back’ business, I need a practical solution. I’ve got your stuff in the stores, I don’t want to pull it out but I do want to recoup the money. Maybe in the meantime I can sell what’s in the stores and keep the margin, and at the end of January give back what’s left’,” Mr Carter said.

“Stuff that’s unsold goes back to them for 100 cents in the dollar. It won’t eradicate the issue completely, but in a practical sense we’ve got the stuff (and have to deal with it).”

He added, “Ironically the margin on Jacaru products is actually quite good because they got a discount when they did the prepayment. Frankly there was some commercial logic, it’s just not a great look when no one else is getting paid.”

Asked to comment on the arrangement with the administrators, a woman who answered the phone at Jacaru’s Burleigh Heads office said, “No, I think you need to check your information. We don’t have any comment for the media, thank you. Have a nice day.”

Mr Wichtendahl did not respond to requests for comment.

Co-op Bookshop chief executive Thorsten Wichtendahl.

He joined Co-op in 2011 as chief operating officer and oversaw its expansion from 39 to 65 stores. He was appointed CEO in 2016. At the time, the company said he had been “the key driver behind its multichannel services, product diversification, growth and operational strategies”.

Co-op Bookshop has total debts of around $50 million, including $20 million in lease liabilities, $16 million owed to suppliers, $13 million to the banks and less than $1 million in employee entitlements.

The company — founded by two University of Sydney students from their garage in 1958 — employs more than 180 people, has 34 stores on university campuses and bills itself as Australia’s largest co-operative with more than two million members.

Suppliers owed significant sums include textbook publisher John Wiley & Sons, toy seller Independence Studios, Australia Post, the University of Western Australia and University of Sydney.

PwC will ask the courts for a three-month extension of the convening period to push back the second creditors meeting, which would have been legally required to be held on New Year’s Eve.

Mr Carter said a sale process was already under way prior to the administration with around 50 interested buyers. PwC has now re-engaged the same corporate finance company to continue the sale.

“If anything I’d expect that number to go up,” he said. “We will get fresh inquiries and some people that had previously had a look and wrinkled their nose are now back with probably more interest.”

‘LOST COUNT OF QUESTIONS’

A “wide selection” of creditors including employees, landlords, suppliers and universities all attended on Wednesday, which Mr Carter said ran to an unusually long two hours for a first meeting.

“I lost count of how many questions there were,” Mr Carter said. Some of those present “saw it coming and others didn’t know it was happening at all”.

“The first (priority) is to stabilise the business and bring some normalcy and trust into the situation, the second is we want to trade profitably through Christmas and into the New Year, and the third is to sell the business as a going concern to maximise the price we can get,” he said.

“Those are the forward-looking (tasks), the backward-looking is what happened — what transactions were done at a time when maybe something else could have happened? The whole investigation piece is true of every administration. Creditors have a right to know, how did we get here?”

Mr Carter said Curious Planet with its “Christmas-friendly” merchandise was well positioned but the campus bookstores were naturally quieter. That will peak again at the end of February, but ordering textbooks “has to be done pretty much straight away”.

“Some of the (intellectual property) Co-op controls is really the co-ordination between the course conveners and lecturers,” he said. “It’s not just about the supply of books, it’s ordering and liaising with the universities. We’ve re-established those relationships.”

PwC is “trying to save as many jobs as possible” through the sale process. “We’re hoping the buyer will take on staff that work there, particularly in the university bookshops where some staff have been there 20 years,” he said.

Announcing the decision last week, chairman Joe Merhi said weak sales had left the board with no option but to bring in an administrator.

“The combination of weak retail trading figures coming up to Christmas and the collapse of ‘over the counter text book’ sales by over 40 per cent from last year, has left the board with no alternative but to appoint a voluntary administrator to help this proud organisation through this period of time,” Mr Merhi said in a statement.

“The Co-op, founded in 1958, has a proud history of serving its members which now number close to two million Australians, but the massive decline in the purchase of textbooks has meant that the board need to diligently and proactively address the potential risks of trading in the Christmas period.”

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