It’s all doom and gloom for some Australian retailers as they are facing extreme risk of financial ruin over the next 12 months according to a report by SV Partners.
The well-known retailers have an annual turnover of more than $100 million and include a large clothing retailer, two computer retail giants, one big supermarket/grocery store and a large newspaper/book retailer.
SV Partners managing director Terry van der Velde says that although the Australian retail climate has shown some growth and many retailers are safe, some companies are unlikely to recover.
“We have seen a number of major retailers enter into external administration in recent months, and this unfortunately is not the end of tough times for the industry,” he explains.
The Commercial Risk Outlook Report August 2016 shows 903 retailers entered into some sort of insolvency administration during the period from March 2015 to March 2016, showing a 6.7 per cent increase. There are currently about 1,200 retailers of all sizes Australia-wide that are at high risk of closing down in the next year or so.
“Financial failure is almost certainly on the horizon for more than a thousand retailers of all sizes across the country, and significantly, for some big retail names,” says van der Velde.
“The financial challenges these companies are facing are reflective of the difficulty that shop front retailers have competing with the online space, which doesn’t have the same issues with labour costs, rising rents, and limited captive markets.”
The expansion of international stores down under has also significantly impacted the local retail industry.
“It is crucial that retail businesses keep their finger on the pulse―changes in market share, price and demand need to be monitored and reacted to quickly.
“We urge businesses to look at the underlying assumptions of their business plans and projections within the context of the evolving retail space and adjust these key business tools as necessary,” he adds.
By Marion Gerritsen