Retail rot spreads to Australia’s high-profile fashion labels – The Sydney Morning Herald - February 02, 2017

The collapse of national fashion brands Marcs and David Lawrence has added another 1130 workers to the retail rout that claimed close to 2000 jobs in the sector before Christmas.

And retail insiders claim the rot that took down Payless Shoes and Pumpkin Patch in December has spread to Australia's upmarket, national fashion chains and there warn of more pain to come.

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Pumpkin Patch fails to secure buyer

Children's clothing retailer Pumpkin Patch announces it will close after receivers fail to find a buyer. Vision courtesy ABC News 24.

Insolvency insiders claim a number of retailers have reached out to them in recent weeks as rising costs and slowing sales push them to the brink.

Brand Collective chief Martin Matthews said he'd be very "surprised" if more retailers didn't hoist the white flag in coming months after Marcs and David Lawrence faltered under close to $30 million in debts.

Mr Matthews said the key issue for retailers was that in many cases sales were not keeping up with cost increases.

"The problem is you have stagnating sales because of the increasing competition in the market from all the new entrants and the fact there's not a lot of investment in differentiation and brand innovation," Mr Matthews said.

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"A lot of people have been hanging on with very marginal earnings and effectively on the brink of collapse for some time."

No buyer

Controlled by retail veteran Malcolm Webster, who co-founded UK fashion chain Jigsaw, Marcs and David Lawrence have been informally "up for sale" for the last year but this process did not result in any deal.

One potential buyer, who would only talk on the basis of anonymity said talks didn't progress because the seller was only interested in a deal for both brands.

"But unlike Pumpkin Patch and Payless (Shoes), which were disasters and you knew as soon as they went into administration that no one would buy them… I suspect this will survive in some way, shape or form," he said.

Insolvency specialist firm Rodgers Reidy has instigated a review of the business, which is likely to lead to job losses even if the administrator can sew up a sale deal.

Director Geoffrey Reidy said an outright sale was only one potential outcome from the administration.

We've heard a lot about tier-three brands getting into trouble but now it's moved into better known national brands

Retail analyst Steve Kulmar

"The alternative is for a sale and restructure of the company… and the third outcome is that we can't find a buyer and the company goes into liquidation," Mr Reidy said.

"We believe there is real potential to deal with the cost side of things, in terms of the company operation and to enable a consolidation or rationalised business, be it Marcs and, or David Lawrence to be offered to a potential buyer."

Mr Reidy said one of the priorities was to "get in front" of Myer and David Jones to discuss the two brands' concession stores.

Rot spreads

Retail analyst Steve Kulmar said the rot that beset tier-three brands like Payless Shoes and Pumpkin Patch late last year had spread to well-known national fashion chains.

"We're now talking about the tier-two brands, we've heard a lot about tier-three brands getting into trouble but now it's moved into better known national brands," Mr Kulmar said.

"There are a number of those tier-two Aussie brands that are going to struggle in the next year or two because they have not kept up with the changing needs of the consumer, they're are now trying to compete on price but they don't have a low cost of doing business so it's an unproductive model."

Former David Jones boss Paul Zahra said the growth of online retail along with the rise of international players such as Zara would drive "ongoing consolidation in the fashion industry and retail more broadly."

Mr Zahra, who is now global retail adviser for PwC said Australia used to be "the last horizon for international players" but this was no longer the case.

"To be successful retailers need three things, they must be omni-channel, a global entity, and they need a unique point of difference," Mr Zahra said.

"Australian retailers that don't tick these boxes are leaving themselves wide open to disruption."

Mr Webster's Sydney-based company M Webster Holdings bought David Lawrence from Truworth Ltd South Africa Group in 2000 and four years later took the womenswear brand to New Zealand.

In 2006, Webster Holdings bought womenswear and menswear label Marcs from upmarket fashion retailer Oroton.

The Webster Holdings website says the company was working to expand the number of David Lawrence standalone stores and department store concessions, as well expand into "other territories".

Do you know more? catie.low@fairfaxmedia.com.au