Receiver positioning Harris Scarfe for successful sale and continued operation

More stores than expected will shut or be put up for sale over the next few weeks.

The discount department store operates nationally, but is better known in its key markets of Victoria, South Australia and Tasmania. Picture: Nikki Davis-Jones

Embattled Harris Scarfe retail staff were told on Monday that the struggling department store would close about one third of its 60-plus stores imminently, with large numbers of full-time, part-time and casual positions affected.

Receiver Deloitte said 21 of the discount department stores would shut over the next few weeks, with a further 44 stores offered for sale in the slimmed down business – five more than originally anticipated.

The bulk of the closures will occur in NSW with eight stores closed, followed by six in Queensland, three in Victoria, two in Western Australia, and one each in South Australia and the ACT.

Harris Scarfe was placed in receivership mid last month with 88 full time, 128 part time and 224 casual positions affected of its more than 1800 staff.

Nearly 1400 jobs remain at the 44 stores which are continuing to trade at present.

Deloitte Restructuring Services partner Vaughan Strawbridge said in a statement on Monday that selling 44 stores was a difficult decision, but one necessary to position the Harris Scarfe business for a successful sale and continued operation.

Mr Strawbridge said his review of the Harris Scarfe stores covered a range of factors such as past and potential future profitability.

“Going forward we certainly remain focused on running the broader store network and selling the business as the best outcome for remaining employees and suppliers,” Mr Strawbridge said.

“Efforts are being made to redeploy affected staff around the rest of the store network, and all staff that leave the business will receive all wages and entitlements in full on the closure of individual stores.”

Over Christmas, the failed department store offered large discounts of up to 50 per cent off some categories.

However, the Harris Scarfe department store, which was founded in 1848, could still be saved. Deloitte is believed to have signed up a dozen bidders who are interested in proceeding with due diligence on the business.

Deloitte is understood to be feeling more confident that a bidder or bidders will emerge, with indicative bids due by Friday 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.

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

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.

It was placed in receivership in 2001 owing $93m to unsecured creditors and $50m in company debt.