Failed vacuum retailer Godfreys gets funding lifeline as white knight sought

The embattled vacuum specialist retailer gets a funding lifeline from the Johnston family as administrators seek a white knight after the loss of nearly 200 jobs.

The owners of the failed Godfreys vacuum retail chain, the Johnston family, will continue to fund the ailing retailer as its administrators look for a potential white knight buyer, but it is already a vastly smaller retail operation with 54 underperforming stores recently shuttered with the loss of almost 200 jobs.

Administrators to the almost 100-year-old Godfreys, Craig Crosbie, Robert Ditrich and Daniel Walley of PricewaterhouseCoopers Australia, have also won approval from the Federal Court to push out the second meeting of creditors to May 28 to give them more time to conduct a forensic investigation into Godfreys collapse while also fielding expressions of interest from possible buyers.

The first creditors meeting will be held on Friday, with the Johnston family the largest creditor and owed more than $60m.

Early details are emerging too of a struggling Godfreys business. The latest findings of the administrators are that Godfreys was losing around $20m a year while its revenue was flatlining, with high rents, a swollen wages bill and the rising wholesale costs of its vacuums squeezing margins. It is believed the higher wages bill was particularly exacerbated by a larger corporate head office and warehouse.

Godfreys CEO John Hardy with John Johnston. Picture: Tricia Watkinson

It comes as around a dozen companies have expressed interest in the Godfrey’s business, however, it is still only an outside chance that Godfreys will return in its present form as a standalone vacuum retail specialist with the most likely outcome its well-known and historic name and operations being absorbed into an existing retailer.

Godfreys Group, the iconic retailer of vacuums that had been selling cleaners for almost 100 years, collapsed into administration last week, with cost of living pressures and the challenging economic environment denting its profitability, shrinking margins and ultimately causing its demise.

Although the retailer also scored a number of ‘own goals’ through poor management decisions, advertising that missed the mark and an early failure to identify and pivot to the shift to stick-vac vacuums.

The business had been owned by the Johnston family, with former patriarch John Johnston a co-founder of the business and still active within the company at 100 years of age in 2018 when he launched a $13.7m takeover bid to take the company private from its then ASX public listing. He later died, just five months after he led the successful takeover of the business.

Now the Johnston family will provide a lifeline to the administrators of Godfreys through their 1918 Finance vehicle that will help the remaining Godfreys stores to trade for at least the next few months as administrators spruik the company to potential buyers.

On Monday night, the administrators sought court approval to extend the second meeting of creditors to May 28 as they seek more time to take in interest and hopefully offers for all or parts of the business from buyers.

The funding lifeline from the Johnston family will help Godfreys to continue to trade as a going concern.

The administrators had also taken the decision to immediately shut 54 stores with the loss of almost 200 jobs, with the bottom one third performing outlets forced to shut to stem the losses at Godfreys, shrink its swollen costs and help restructure the businesses ahead of a possible sale.

Last week when Godfreys collapsed into administration, it placed in doubt the future of its 141 stores across Australia and New Zealand and its 600 staff as well as the historic Godfreys name.

“Sadly, like many retailers, we have been heavily impacted by consumer confidence and spending due to the economic era of high inflation, rising interest rates, and intense cost of living pressures,” Mr Johnston’s daughter Jane Allen said last week.

“We are also still suffering from the unprecedented business disruptions of the Covid-19 pandemic,” she added.