May one of the worst months for retailers

With Australian fashion brand Metalicus going into administration and Esprit announcing its departure from the local market, May is shaping up to be a tumultuous month for retailers.

It has already been a difficult year, with the number of retailers entering external administration in January and February this year 20 per cent higher than in 2017, according to Amanda Young, partner at insolvency specialist Jirsch Sutherland.

Young says these developments highlight the difficult trading conditions retailers are facing, and says it could get worse as May is traditionally one of the worst months for external administrations.

“May was the worst month for this sector in both 2016 and 2017, and 2018 already has a number of casualties,” she says.

“We started the year with a number of high profile brands such as Maggie T and Zachary the Label entering into administration and, more recently, Esprit announcing it is closing all of its Australian stores and then…fashion label Metalicus going into voluntary administration.”

Young says common factors that may cause financial distress for retailers include a lack of systems and processes, no track record, an absence of effective marketing, market saturation and location—or lack thereof.

“Our experience is that traditional bricks-and-mortar operations continue to face major challenges—as evidenced by Metalicus and Esprit,” she says. 

“They’re being slammed by high rents, staff costs and the growing competition from online stores, and that’s exacerbated by other key contributors such as obsolete stock issues and poor record keeping.”

By Ruth Cooper