The company had experienced a significant decrease in sales in FY24 amid a challenging economic environment and reduced consumer spending.<\/p>\n
Rising costs also had a significant impact on its margins.<\/p>\n
\u201cThe reduction in both sales and margin, combined with a high fixed-cost structure, made the company unprofitable,\u201d the report said.<\/p>\n
Management restructured the business by reducing staff and took steps to vacate unprofitable stores, but couldn\u2019t reduce costs within the timeframe or at the level needed to turn around the company, liquidators said.<\/p>\n
Attempts by Smiths City to sell the business in the months before going into administration had been unsuccessful, while trading conditions \u201csignificantly worsened\u201d.<\/p>\n
The liquidators\u2019 report shows secured creditors are owed $9.5m.<\/p>\n
Preferential creditors are owed $1.16m, which includes a claim of $1.02m from Inland Revenue and a subrogated claim by ASB of $211,000, after the bank made funds available for wages prior to the administration.<\/p>\n
The liquidators said employees were paid all preferential entitlements in full during the administration period.<\/p>\n
The company employed around 137 staff at the time administrators were appointed.<\/p>\n
Meanwhile, unsecured creditors are owed more than $15.4m.<\/p>\n
The company has estimated assets of $8.7m, however, some of the funds will be subject to administration costs and expenses.<\/p>\n
Creditors include ASB, 2 Degrees, Air New Zealand, Coca-Cola Amatil (NZ), Go Media, Miele New Zealand, New Zealand Post, Samsung Electronics New Zealand and Spark.<\/p>\n
Colin Neal\u2019s investment company Polar Capital bought Smiths City in 2020 in a deal worth around $60m.<\/p>\n
At the time, Smiths City had 29 stores, but operated just nine by the time it went into administration.<\/p>\n
Downfall of a retail icon<\/p>\n
Chris Wilkinson, a consultant and managing director of First Retail Group, previously told the Herald that Smiths City\u2019s demise was unsurprising, given its position in the market today.<\/p>\n
Wilkinson said while Smiths City was a well-established South Island brand, its \u201cbiggest misstep\u201d was its move into the North Island.<\/p>\n
\u201c[Smiths City] really didn\u2019t have a distinct edge in the North Island and people didn\u2019t know them.<\/p>\n
\u201cThey ended up taking expensive sites in Auckland and many other areas around the country and they just didn\u2019t have that grunt and that market awareness in the face of the likes of Harvey Norman, which was growing extensively, Noel Leeming and other big brands.\u201d<\/p>\n
Wilkinson said retail had also changed, with new big-box retailers branching out into other markets, \u201cchipping away\u201d at the likes of Smiths City.<\/p>\n