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The parent company of embattled fashion retailer Jeanswest will come out of administration with control returned to its directors, following a creditors' meeting today where a deed of company arrangement (DOCA) was approved that delivers more than $4 million in wages owed to former employees.
The result was made possible due to overwhelming consumer support during a two-month sales campaign to move inventory after the Perth-founded retailer went into administration in late March.
At the time that Pitcher Partners Melbourne was appointed as administrator, Jeanswest employed 220 full-time, 155 part-time, and up to 307 casual employees, the bulk of whom stayed on during sales to shift $15 million worth of stock during the eight-week campaign in April and May.
The cash inflow put Jeanswest director George Yeung in a position to present a DOCA that will return 100 cents in the dollar to employees, including owed annual leave, long service leave and other entitlements.
As outlined in the creditor’s report released ahead of the meeting today, outstanding wage entitlements were more than $4 million, as well as almost $900,000 in annual leave and $624,000 in long service leave.
Yeung has thanked Pitcher Partners Melbourne, inventory specialists Gordon Brothers, and Jeanswest’s team members for their commitment across the last few months.
"We regret having to pursue this course of action, but we were left with very few options but to restructure as sales in our stores were below expectations,” he says.
“When we are out of administration, we will begin work on a new business model and the next chapter for Jeanswest.”
Administrator Lindsay Bainbridge says the employees were the heroes of the sales campaign, despite the difficult circumstances.
“The results of the sales campaign exceeded all expectations, which has allowed team members to be paid all their entitlements,” he says.
“This is a great result for Jeanswest employees. Given the pressure of a wind-down, the team’s composure and commitment were the key drivers of that performance.”
Luke Johnston, a director in Gordon Brothers’ client coverage and origination division, says the group is pleased its strategy to support the Jeanswest sales had outperformed expectations.
"We recognised that a successful sales campaign was vital to maximising returns to employees and to increasing the possibility of a DOCA being developed,” he says.
“We were asked to consider a number of strategies but ultimately the Administrators went with our preferred model of selling-down the company’s stock through the stores to avoid a fire sale, and we were delighted with this strong result.”
"Jeanswest’s employees were incredibly supportive throughout and I want to acknowledge them. This was a large project conducted in a limited timeframe and this result would not have been possible without their expertise and commitment," adds Richard Ansell, senior director in Gordon Brothers’ retail team.
In its analysis of Jeanswest’s financial difficulties, Pitcher Partners notes the company’s business model was heavily reliant on bricks-and-mortar retail, through its 87 retail stores around Australia.
“Many stores were underperforming, and with the weak retail environment across Australia and consumers not spending in the stores, there was little prospect of recovery while retaining the current operating model,” Bainbridge says.
Bainbridge confirms that external unsecured creditors will only receive 2c for every dollar owed, which is unfortunate given they are owed about $13 million, but he describes this as the only option in the circumstances.
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