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Insolvency experts expect more blood on the retail floor in the coming months as job security fears curb the consumer urge to splurge.
The downturn in retail spending has already claimed the scalps of a number of retailers, with boutique top-end fashion stores among the notable casualties.
Latest to join the list was high fashion footwear retailer Sole, once 12-stores strong, which had accountancy firm Staples Rodway appointed as its receivers last week.
"By the time I was called in they'd shut down all but two of the retail outlets, which I have now closed and am in the process of liquidating," said director Gareth Hoole.
Like premium fashion retailers Little Brother and Tie Rack, Sole appears to have been a victim of the retail slump.
So pronounced is the downturn that five shop fronts now lie vacant in Auckland's luxury shopping precinct Chancery. "For lease" signs are plastered across the frontage of spaces once occupied by bag retailer Mellencamp, womenswear retailer Freeway, men's clothing store Cube and designer gear stockist Brands of the World.
Corporate Finance principal Andrew McKay, who is handling the Tie Rack liquidation, believed the year would be a hard one for a lot of fashion retailers. "It's just discretionary spend - people will have to make the call where they put their dollar."
The six-store Tie Rack was down to just four shops when Corporate Finance was appointed last month, having already closed the Botany and Lambton Quay outlets.
"The stores are still operational but we'll be reviewing how many stores we continue to keep open, probably inside the next week."
Hoole - who is also managing the case of Auckland fashion operator Texas Radio and The Big Beat, the liquidation of homeware retailer Eon Design and the voluntary administration of The Fine Wine Delivery Company - said the consensus among retailers and fellow insolvency experts was that there may be more to come.
"At this stage of the year when normally people are still on holiday, I've kind of worked right the way through. Just in the last few days I've had a number of inquiries about potential liquidations. I think that we're probably in for a year, maybe even two years, of a lot more activity on the insolvency front.
"There's always going to be insolvencies, there's always going to be businesses that fail - but there just seems to be more of them now who previously would've survived."
The effects of high interest rates, fuel and commodity prices were starting to show up in people's spending habits, and growing uncertainty over job security was compounding the reluctance to spend, he said.
Hoole said the credit crunch was also limiting the ability of smaller businesses to raise capital.
"What we're seeing now is that banks are trying to reduce businesses' overdraft facilities. They're saying you might have a $250,000 facility, we'd like to see you bring it back to $150,000 - which means [the business] has to find $100,000 from somewhere."
With consumer spending down, retailers potentially have too much working capital tied up in stock and debt.
"All of those factors are conspiring to make it very difficult for a retailer to survive."
He urged retailers to keep a close eye on working capital and cashflows.
OUT OF FASHION
Sole
Accountancy firm Staples Rodway was called in to the once 12-store strong, high-fashion footwear retailer last week. At that stage, Sole was down to just two outlets.
Satori
The parent company of premium menswear retailer Satori went into liquidation with creditors owed more than $2 million last week. Satori itself is not in liquidation but is on the market in a bid to raise funds to pay down the debts of parent company Axiom international.
Little Brother
The boutique menswear brand announced in November it was giving up its direct retail presence. It will shut its two high street retail outlets and the label will instead be sold through menswear chain Barkers by April.
Tie Rack
The clothing accessories provider was placed in liquidation last month. Two stores, in Botany and Wellington's Lambton Quay, had already closed by then, leaving just four outlets - three in Auckland and one in Johnsonville. Those stores are still open but receiver Corporate Finance is this week reviewing how many of them will continue to operate, pending a wider outcome for the business.
Texas Radio and the Big Beat
Accountancy firm Staples Rodway was called in to boutique fashion operator Texas Radio and The Big Beat last year. Its Ponsonby outlet remains, but its Karangahape Rd outlet has closed.
