The future of hundreds of retail jobs at Colette and The Daily Edited hang on a vote next week

The future of hundreds of retail jobs across the nation hang in the balance, with a vote on the future of Colette by Colette Hayman and The Daily Edited scheduled for next week.

The future of Colette by Colette Hayman stores across the nation hangs in the balance.

The future of hundreds of retail jobs across the nation hang in the balance, with a vote on the future of Colette by Colette Hayman and The Daily Edited scheduled for next week.

Marquee Retail Group, the parent company which owns the brands, which operated more than 60 stores across Australia, collapsed in early April, with a report to creditors released this week revealing the company’s net debts run to more than $30m.

Former Myer managing director Bernie Brookes - who is a Marquee director and major shareholder - pumped $3.6m into the company since October last year in a bid to keep it afloat, however the downturn in consumer spending over the past year or so proved insurmountable.

Administrators Mackay Goodwin were appointed to the Marquee group in early April and assessed options including selling the business, however after receiving 19 expressions of interest, only three low ball offers eventuated.

Former Myer managing director Bernie Brookes.

The administrators are now proposing that creditors vote to put in place a deed of company arrangement (DOCA), under which the group will continue to trade.

Under this proposal, unsecured creditors will receive between 5c and 20c in the dollar for the money they are owed, compared with 4.68c under a best-case scenario if the companies were liquidated.

Mr Brookes, as a secured creditor, would be repaid in full under both a DOCA or a liquidation scenario.

If the DOCA is not accepted, hundreds of retail workers across the nation will lose their jobs.

Marquee Retail Group was operating 63 retail stores under the Colette by Colette Hayman and The Daily Edited brands across Australia when the administrators were appointed, with Colette employing 437 permanent and casual staff, The Daily Edited 36 staff, and the parent company eight staff.

Mackay Goodwin closed 15 stores following its appointment to put the business on a sustainable footing.

For the four weeks or so since the administrators were appointed, the group has returned a modest operating surplus, not counting the cost of the administration.

The creditors’ report has now been sent out to those owed money, including Westfield owner Scentre Group, and creditors will vote on the DOCA proposal at a meeting to be held on Wednesday, May 8.

The creditors’ report indicates that the business was crushed by the downturn in consumer sentiment which came with the rapid increase in interest rates and higher cost of living pressures over the past two years.

Marquee Retail Group, the report says, was set up in August 2020 and the following month acquired 90 per cent of Colette - which itself had collapsed into voluntary administration as a result of pandemic lockdowns.

In May, 2022, the Reserve Bank of Australia started what would be a series of rapid official interest rate rises.

In December of that year, The Daily Edited was acquired, with the company expecting it to make a loss for the next couple of years, but with the group to be bolstered by the Colette operations.

By November last year the cash rate had hit 4.35 per cent however, and retail was suffering.

“As rates increased, so did rent and other day to day expenses, which had an impact on the companies’ key performing stores in lower socio-economic locations,’’ the creditors’ report says.

By this time the companies were having “significant cashflow issues” and tapped Mr Brookes for capital in October and again in November.

Another third party was approached for funding but declined to be involved.

“Christmas and Boxing Day sales, which were a historically high sale season for the companies, was low,’’ the report says.

“A targeted campaign was undertaken to sell stock at a heavy discount to increase foot traffic

and maintain cashflow.’’

January this year was even worse, with sales falling by up to 35 per cent.

“A heavily discounted mid-season sale was undertaken to counteract the decline in sales, but this only brought sales to a year-on-year decline of 10 per cent to 20 per cent per week of February and this carried through to March,’’ the report says.

“Cashflow problems reached a tipping point and began to impact on receipt of new stock. The companies began to default on rental payments.’’

In March the directors sought the help of Mackay Goodwin, and at a meeting on March 20, they determined that “the companies, as a consolidated group, were insolvent or likely to become insolvent in the next 12 months’’.

The group was placed into voluntary administration on April 2.

The group made a net loss for the past three financial years, blowing out to $7.2m in FY23, however revenue was growing strongly, up from $25.7m in FY21 to $52.8m two years later.

The creditors’ report concludes that the main reason for the business’s failure was the much greater than expected downturn in retail trade last year, as well as increasing cost pressures.

“Significant pressure on consumers (interest rates, cost of living increases) impacted spending with a revenue downturn from October 23 to March 24 (having) a material impact on the

companies’ trading performance which was far more severe than been budgeted,’’ the report says.

“Material increases in business costs caused significant financial strain due to increase in

labour costs, rents, power costs and interest rates that were unable to be absorbed and

passed onto customers.

“Increasing the number of stores from 35 to 65 over a three-year period caused an

increase in sales but also concurrently increased fixed costs from additional store rental

costs to exceed $10m per annum as well as a material increase in salary costs to

staff the additional stores.

“However, when the companies experienced an unexpected, sharp sales downturn the increase in the fixed costs incurred remained which materially impacted the profitability of the businesses.’’

But there are some bright signs for the future, with real wages growth and the stage three tax cuts coming through mid-year likely to loosen consumers’ purse strings, Mackay Goodwin says.