On paper, Cue Clothing Co's first full year under Hilco Capital looked like progress. Sales were edging back up, and gross margin was the strongest of any recent year, in the administrators’ review.
But the cost base tells a different story. In FY26, revenue grew just 2 per cent to $110.5 million, while operating expenses climbed almost 15 per cent to $75.5 million. Staff, marketing, rent and interest all rose at once.
Seventeen months after Hilco bought the Cue and Veronika Maine business from the founding Levis family, the business was placed in administration and receivership, owing about $50.7 million across its three companies.
The administrators’ second report to creditors from BDO's Shaun McKinnon and Duncan Clubb – obtained by Ragtrader via ASIC – traces how it got there. It covers about $20 million in founder-era debt that was taken on by Hilco, a lender that kept funding the business into its final months, and a sale campaign that initially reached 101 potential buyers.
How it fell
Director Jon Howarth appointed BDO as voluntary administrators on September 15. Shortly afterwards, Hilco's lending entity HUK 156 appointed Kate Warwick and Vaughan Strawbridge of FTI Consulting as receivers and managers under its security. The receivers control all trading, staff, leases and assets.
At the time of appointment, the administrators’ figures show 51 boutiques and 88 concessions across Australia and New Zealand, with about 575 staff in Australia and 34 in New Zealand. The receivers closed five stores on September 21, being Cue at Melbourne Central, Armadale, Woden and Parramatta, and Veronika Maine in Mosman.
The director put the failure down to poor trading performance. The administrators go further, pointing to sustained trading losses over an extended period and a store footprint that had been shrinking from historical levels.
In their view, the companies were already reporting losses before Hilco bought them in April 2025. Hilco then provided additional funding, and sales and gross margins improved, but not by enough to outpace operating costs. The administrators conclude that rising expenses and insufficient revenue growth left the business loss-making and reliant on outside funding. A sale process and safe harbour advice that followed were ultimately unsuccessful.
Where the money went
Consolidated revenue fell from $113.7 million in FY23 to $104.7 million in FY24, before recovering to $108.3 million in FY25 and $110.5 million in FY26. Gross margin climbed from 46.8 per cent in FY24 to 59.2 per cent in FY26.
Part of that margin gain came from spending less. Cost of sales fell 15.6 per cent in FY26 to $45.5 million, and inventory purchases at the Australian company dropped from about $52.3 million to $36.5 million. The administrators note they don't know whether this reflects lower unit costs or lower volumes.
Employee costs reached $35.4 million in FY26, up from $29.8 million the year before. Marketing climbed from $3.3 million to $5.6 million between FY25 and FY26, driven by photographic campaigns, digital advertising, marketing consultants, David Jones advertising allowances, SMS and outdoor advertising. Occupancy rose from $13.2 million to $15.7 million, largely on higher rent, and finance costs grew from $2.2 million to $3.6 million on the Hilco borrowings.
The group posted a net loss of $20.6 million in FY26, after losses of $15.3 million in FY24 and $3.3 million in FY25. It lost a further $5.7 million in the seven weeks to August 23, 2026.
The FY25 result was flattered by other income of $21.4 million, which the administrators attribute mainly to about $20.1 million in debt forgiveness linked to the Hilco acquisition.
The founder debt
Hilco's investment was structured through three related entities. HUK 150, trading as Hilco Capital, bought 100 per cent of Cue & Co. HUK 156 provided a $7.5 million revolving working capital facility, and HUK 155 took on about $20 million of existing debt.
That $20 million was already owed by the companies before the sale. Only the creditor changed, moving from entities associated with the former owners to HUK 155. It was then documented as a subordinated loan maturing in March 2035, and it is registered as a security interest over all three companies.
Combined, the two Hilco lenders are owed $27.7 million, secured over all present and after-acquired property. As secured creditors, they rank ahead of unsecured creditors such as trade suppliers and landlords, although employee entitlements are paid from circulating assets first.
Cue & Co also fell behind on tax obligations from FY25. It received eight letters from the ATO about outstanding amounts between May and November 2025.
Who is owed what
Across the group, the administrators’ figures show 861 creditors owed $50.7 million as of September 15. Most of that sits with Cue & Co, which owes $47.3 million.
The owings include $27.7 million to secured creditors, $2.5 million in entitlements to 575 employees and $2.8 million to the ATO. A further 175 trade creditors are owed $12.8 million, and landlords $1.2 million. International inventory suppliers account for about 52 per cent of the aged trade creditor balance.
Creditors' own claims run higher. Proofs of debt lodged against Cue & Co total $51.8 million, including $7.9 million from 13 landlords. Unsecured claims alone total $20.6 million, against $16.9 million in the books. The administrators put that gap down mainly to landlords claiming future rent and overseas suppliers claiming more than the books show.
The ATO, by contrast, has claimed $1.5 million, about half the $2.8 million in the books. The administrators attribute the difference to lump sum payments in the six months before their appointment that had not been reconciled in the accounts.
Staff entitlements remain uncertain. The administrators’ figures show $1.4 million in long service leave and $1.1 million in annual leave, but the receivers have been told some balances are wrong and are recalculating them with Cue's payroll team.
Against those debts, the administrators estimate Cue & Co's assets could realise between $19.1 million and $24.6 million, most of it inventory. The final figure depends on the sale.
Insolvency findings
The administrators' preliminary view is that Cue & Co may have been insolvent in the six months before their appointment, or at least from July 2026, when aged creditor balances rose. Before that, Hilco's funding allowed it to pay debts as they fell due.
They also weigh an alternative view that the company was insolvent from as early as June 2025, given its trading losses and ATO debts. Against that, they point to Hilco's continued funding, its sale process and the safe harbour advice the company sought.
Their preliminary review found no breaches of director duties.
The sale campaign
FTI compiled a target list of 101 parties, made up of 65 trade and strategic players and 36 financial investors. A further 15 parties approached the receivers unprompted. In total, 29 parties signed confidentiality deeds.
Four non-binding indicative offers came in by the October 8 deadline. The structures vary, but each proposes to take a material part of the store, concession and ecommerce network and to employ a significant share of staff.
Shortlisted bidders entered a second phase on October 12, with management sessions, site visits and draft transaction documents. Final offers were due in late October. The receivers are targeting signed documents in early November and completion by early December.
No offer has been accepted, and no bidder has been granted exclusivity, according to the administrators' report.
In a liquidation scenario, Cue & Co’s ordinary unsecured creditors would receive between nil and 3 cents in the dollar.