Bidders buy in to Harris Scarfe sale

Four bidders have stepped up with good prospects, while 21 stores are slated for closure by February 2.

In the wake of the Harris Scarfe collapse, it was feared that as many as 27 stores could shut. Picture: Brendan Radke

The receivers and managers for failed department store Harris Scarfe are on track to shutter most of the 21 stores slated for closure by February 2, but remain hopeful for a sale of the retail business with it attracting non-binding proposals from four bidders.

Deloitte Restructuring Services had initially opened discussions with more than 20 interested buyers in the wake of the collapse of Harris Scarfe two weeks before Christmas and has spent the new year narrowing that down to four strong bidders.

Private equity firm Allegro Funds, which owned Harris Scarfe for nine days before it placed it into voluntary administration, is not one of the final four bidders for the department store owner.

It is believed the final four bidders are all local and have existing retail investments or retail operations and have enough reputation, calibre and capital firepower to give confidence to Deloitte that it could resuscitate the failed business if it bought it.

Deloitte is hopeful that it can nail down an offer from a final bidder by February 14, but it is willing to extend that timetable as it works though any conditions attached to the final bid from the successful buyer.

In the meantime, Harris Scarfe managers and executives are working to clear stock from stores that are planned to close, with 21 stores targeted for closure and confidence growing that the majority of those stores can be shut on February 2.

In the wake of the Harris Scarfe collapse, it was feared that as many as 27 stores could shut, threatening the jobs of hundreds of the 1800 people who work for Harris Scarfe.

Under a possible restructure proposal initially circulated by Deloitte, the firm believed Harris Scarfe could have a profitable future if it cut its store network from 66 to as low as 39, with the smaller portfolio generating annual sales of $285m and pre-tax earnings of $16m. But later it was decided to shut 21 stores at this stage.

Harris Scarfe was put into receivership two weeks before Christmas as the downturn gripping the retail sector claimed another victim and retailers struggled under shrinking sales and deteriorating profit margins.

Deloitte Restructuring partners Vaughan Strawbridge, Kathryn Evans and Tim Norman were appointed receivers and managers over Harris Scarfe and a number of associated entities.

If Harris Scarfe is sold it will be the second time it has been brought back from the dead. It was placed in receivership in 2001 owing $93m to unsecured creditors and $50m in company debt.

It was later rescued and restructured and most recently was owned by Steinhoff International, itself a wobbling international retailer with its own financial woes. Steinhoff in Australia also owned Best & Less, Freedom, Fantastic Furniture, Snooze and Plush.

Steinhoff, which changed its name to Greenlit Brands, sold off Harris Scarfe as well as Best & Less and women’s fashion chain Postie to private equity firm Allegro Funds only nine days before Allegro put Harris Scarfe into voluntary administration and later receivership.