Stuttafords talks focus on store closures
THE 159-year-old department store Stuttafords will meet with creditors and shareholders tomorrow to discuss the company’s future under business rescue. One of the outcomes may be closure of some of its stores.
Stuttafords CEO Robert Amoils said on Friday that although “it is not our intention to close any store locations in the medium term, this is subject to various landlord discussions that are currently under way”.
Stuttafords employs about 950 people across its eight department stores in South Africa, two in Botswana and one in Namibia and 16 mono-branded stores, which sell brands such as Ted Baker and Tommy Hilfiger.
Before the business rescue, a material head office cost-rationalisation had taken place to trim overhead costs and align them more closely with store profitability, Amoils said.
“At this point in time we believe that our cost structure is as lean as it can be without negatively affecting trading performance and customer satisfaction levels.”
Stuttafords announced last October it had gone into business rescue, and this week the Financial Mail reported the company owed R836-million to creditors, including R147-million to Nedbank.
According to the article, investors may be negatively affected by the way in which the proposed business-rescue plan is structured, which will see small suppliers (concurrent creditors whose debt wasn’t secured) get 5c for every R1 owed. Thereafter, over the next year and half, they will get another 18c for every R1 due to them.
Stuttafords owes Estée Lauder R53.8-million, Adidas R1.34-million, Levi Strauss R2.1-million, L’Oreal SA R13.5-million, Puma R2.1-million and Tommy Hilfiger R14.6-million.
This week, Woolworths said it would introduce Estee Lauder to its South African stores.
Amoils said the business-rescue plan encompassed the maximum possible distribution payable to concurrent creditors and suppliers, given the prevailing cash-flows and projected profits of the business.
“[It] is a far better outcome for concurrent creditors or suppliers than the liquidation alternative . . . I believe it important to note and emphasise that shareholder claims (which constitute the largest creditor grouping) are being treated the same way as all other concurrent creditors and suppliers and all distributions in respect RESCUE IS BETTER: Robert Amoils, CEO of Stuttafords of said shareholder claims are being remitted, in full, to Nedbank as part of security structure in place with Nedbank,” said Amoils.
Nedbank declined to comment, citing client confidentiality.
Amoils and Bruce Rubenstein, CEO of Vestacor, the private equity firm that owns the retailer, will inject new capital of R10.3-million into the business in their personal capacities.
But the retailer needs an estimated R210-million to buy winter stock, which may be difficult to come by.
Amoils said this cost would be funded by migrating supply to consignment or open-account, which could enable the business to fund the stock purchases by matching stock turns with payment terms.
Chris Gilmour, an investment analyst at Absa Wealth & Investment Management, said part of the reason for Stuttafords going into business rescue in the first place was the difficult retailing environment.
“Stuttafords has been around for many years and they have survived many cycles, but for them to go this far down is reflecting just how tough this cycle really is. Stuttafords had a window of opportunity, where they held existing stock and they have been getting protection from creditors.”
It will be difficult for the retailer to survive in this kind of retail environment, especially from a stock perspective, said Gilmour.
Yet, Amoils insisted that management remained optimistic about the outcome of the business-rescue process. “Whether finalised on Monday or not, it will yield positive results for all stakeholders relative to the liquidation alternative.”