Harris Scarfe receivers look to prune up to 27 stores

Staff at collapsed department store Harris Scarfe will be informed in the second week of January which of its 66 stores will close.

There are fears as many as 27 stores could shut, threatening the jobs of hundreds of the 1800 people who work for Harris Scarfe. Picture: Nikki Davis-Jones

Staff at collapsed department store Harris Scarfe will be informed in the second week of January which of the 66 stores will close as the struggling retailer is slimmed down ahead of a potential rescue of the business.

There are fears as many as 27 stores could shut, threatening the jobs of hundreds of the 1800 people who work for Harris Scarfe.

Receivers and managers from Deloitte Restructuring Services will detail the closure program in the new year.

However, the Harris Scarfe department store chain could yet be saved.

Deloitte has signed up a dozen bidders who are interested in proceeding with confidential due diligence on the business, The Australian can reveal.

Deloitte is feeling more confident that a bidder or bidders will emerge, with indicative bids due by January 10 and final offers by February 14.

Under a possible restructure proposal circulated by Deloitte, the firm believes 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.

Deloitte wants to remain flexible on the store closure program and provide for any potential buyer a larger store network if required, especially if some shopping centre landlords are prepared to do a deal on rents.

In the meantime the failed department store is spruiking discounts to shoppers, offering up to 50 per cent off some categories over the Boxing Day sales as it attempts to maximise sales and profitability before a sale.

Harris Scarfe was put into receivership two weeks before Christmas as the malaise gripping the retail sector looked to have claimed another victim.

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

The discount department store operates nationally, but is better known in its key markets of Victoria, South Australia and Tasmania, where Harris Scarfe retails linen, kitchenware, homewares, electrical appliances and apparel. The business has annual sales of $380m.

Harris Scarfe has had a tough time over the past two decades as it was passed from owner to owner in a corporate game of pass the parcel.

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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.

“We are obviously in a challenged retail environment and it’s a business that clearly is facing headwinds, as a lot of retail businesses are, so at the end of the day it is now in the hands of the administrators,’’ Allegro founding partner Chester Moynihan told The Australian earlier this month.

“But when you own these businesses essentially sometimes you have to make the hard decisions, and it was a business that before we bought it had a series of challenges.”