All former Jeanswest employees are now expected to be paid 100 per cent of the more than $4 million they were owed.
This is thanks to overwhelming customer spending during the retailer’s stock reduction sales after its parent company Harbour Guidance fell into voluntary administration earlier this year.
The company’s director, George Yeung, is also expected to present a Deed of Company Arrangement (DOCA) at the second creditors’ meeting tomorrow, June 27. If the DOCA is accepted at the meeting, Harbour Guidance will come out of administration and control returned to the directors.
Under the proposed DOCA, Jeanswest employees will be returned 100 cents in the dollar, including owed annual leave, long service leave and other entitlements. Outstanding wage entitlements were more than $4 million, as well as almost $900,000 in annual leave and $624,000 in long service leave.
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 these employees stayed on during the sales, helping to shift more than $15 million in inventory during the eight-week sales campaign in April and May.
Yeung 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 said.
“When we are out of administration, we will begin work on a new business model and the next chapter for Jeanswest.”
Administrator Lindsay Bainbridge said 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 said.
“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.”
Gordon Brothers' director of the client coverage and origination division, Luke Johnston, said he was 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 said.
“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.”
In its analysis of Jeanswest’s financial difficulties, Pitcher Partners noted that 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 said.
Bainbridge confirmed that external unsecured creditors will only receive 2 cents for every dollar owed, which was unfortunate given they were owed about $13 million, but it was the only option in the circumstances.
“If the DOCA were to be rejected and the company liquidated, it is likely that unsecured creditors would receive zero,” he said.