Whitcoulls stores face closure

The flagship store in Queen St, Auckland, is one of 60 Whitcoulls and five Borders outlets nationwide the administrators will be working to save. Photo / Greg Bowker

The future of Whitcoulls - one of New Zealand's most famous and enduring retail chains - is in jeopardy after administrators were called in last night to run the book-retailing business.

The Herald understands some store closures and staff losses are likely.

Whitcoulls' owner, Australian-based REDgroup Retail, appointed Ferrier Hodgson to take over the management of its businesses in New Zealand, Australia and Singapore.

The company owns 260 stores with 2500 staff in the three countries, including the 60 Whitcoulls and five Borders outlets in New Zealand and the Angus & Robertson chain in Australia.

Ferrier Hodgson partner Steve Sherman said that as far as possible it would be business as usual for the stores while his firm undertook an "urgent assessment" of the company's financial status.

Unlike receivership, the administrators' role is not to sell the business but to try to make it viable again.

Mr Sherman said he would meet creditors - such as book publishers - probably in the first week of March.

The administrators will aim to set up repayment deals with the creditors to buy the company time to get back on its feet.

They will also make a call on whether customers can redeem store vouchers.

If the voluntary administration is unsuccessful, the company could be placed into receivership.

The move comes a day after the Borders chain in America collapsed. The two Borders businesses are not connected - they are owned by different corporations - but they have both encountered the same problems.

Both Whitcoulls and the New Zealand Borders chain have faced a tough trading environment in the past few years, with consumers placed under pressure by the recession and global financial crisis.

The growth in online book buying has also created challenges - strong NZ and Australian dollars have made it cheaper for people to buy online from overseas websites. Sites such as Amazon offer cut-price books and deals such as free postage.

Staff at the Whitcoulls store in Queen St, Auckland, had not heard anything about the voluntary administration last night.

One employee, who had worked at the store for just months, said he was surprised to learn the company was having financial difficulties. "It's pretty shocking really ... It kind of makes you a little nervous."

Publishing company Hachette New Zealand said last night it was too early to tell what the outcome of the voluntary administration would be.

"REDgroup has previously indicated financial problems as a result of their Australian companies," managing director Kevin Chapman said.

"Obviously it's not the best news, but I think it's too early to be making guesses."

REDgroup, which is owned by private equity giant Pacific Equity Partners, has been hit harder in Australia than New Zealand, and has struggled with debt issues.

In July last year, the company said a review of its accounts had shown it was likely to breach two out of three of its banking loan agreements on August 28.

The company said at the time that it was seeking a temporary exemption for the agreements from its financiers.

REDgroup Retail last year reported a first-half profit after tax of $19.5 million, up from $10.7 million in the previous year.

It has been trying to restructure its business by investing in e-books, relaunching its Whitcoulls website and cutting costs.

But it has faced stiff competition from Paper Plus, which embarked on a $22 million plan in 2009 to increase its store numbers from just under 100 to 110 by Christmas.

In December, the Herald on Sunday reported that publishing companies had said they had received few, if any, book orders from Whitcoulls over the previous five weeks - normally the most profitable time of the year for booksellers.

Pacific Equity Partners bought Whitcoulls and Angus & Robertson from British bookseller WH Smith for A$135 million in 2004.

It later acquired 32 Borders stores in New Zealand, Australia and Singapore in a deal worth as much as A$110 million.

129 YEARS IN THE BUSINESS OF BOOKS

Whitcoulls is one of New Zealand's oldest companies, and was one of the first to be registered under the Companies Act 1882.

It began in 1882 in Cashel St, Christchurch, as a partnership between bookseller George Whitcombe and printer George Tombs. Whitcombe and Tombs dominated publishing in NZ for decades and became the Southern Hemisphere's largest educational publisher.

In 1971, it merged with Dunedin office supplies company Coulls Somerville Wilkie.

It was renamed Whitcoulls in 1973 and shifted its focus to retailing.

The chain has had a string of high-profile owners over the past three decades, including Ron Brierley's Brierley Investments, Graeme Hart's Rank Group, Eric Watson's Blue Star Group, British bookseller WH Smith, and finally Australian private equity firm Pacific Equity Partners.

MAJOR MILESTONES

1991: Rank Group pays Brierley Investments $71 million for a majority stake in Whitcoulls, moving to a full buy-out in 1996. It also buys Australian chain Angus & Robertson.

1996: Blue Star pays $320 million for both chains.

2001: Both chains are bought by WH Smith for $126 million.

2004: PEP buys both chains for $135 million; adds Australian newsagency chain Supanews, plus 32 Borders stores in New Zealand, Australia and Singapore, as well as the Calendar Club chain, which sells calendars in malls over the Christmas period.