Dick Smith and Laura Ashley demise only tip of the iceberg for Australian retail industry
Eleven more major Australian retailers with turnovers of $100 million or more are facing the same high risk situation as collapsed retail giants Dick Smith and Laura Ashley, according to commercial data by specialist accounting firm SV Partners.
The SV Partners March 2016 Commercial Risk Outlook Report analyses more than 20 million financial records from various sources relating to Australia’s 2.34 million operating businesses. The report identifies the sectors and geographical location of businesses most at risk of default during the next 12 months.
According to the report, 11 large unidentified retailers are displaying the same behaviours exhibited by Laura Ashley and Dick Smith prior to their voluntary administrations in late 2015.
The data also shows another three Australian retail giants with turnovers of more than $500 million are sitting in the second highest financial failure high risk category.
Apart from the retail sector, businesses operating within Australia’s construction, professional, scientific and technical services, and manufacturing industries are also most at risk of default within the next 12 months.
SV Partners Managing Director Terry van der Velde said it was important for the industry and governments to listen for and address the distress signals expected in the Australian retail industry during the coming months.
“Retail is the canary in the coal mine for the Australian economy,” Mr van der Velde said.
“Our analysis shows that three other Australian retailers are sitting in the same high risk category as Dick Smith and Laura Ashley in December 2015, meaning we could see more big retail names in serious financial trouble in coming months.
“To reduce financial risk, we urge businesses to be vigilant in accounts collection, closely monitor cash flow, and make sure their financial reporting gives a complete and up-to-date picture of your financial situation.
“Most importantly, these businesses need to seek professional advice to make sure their finances are in order,” he said.
The report’s findings show nearly 50,000 Australian businesses are expected to face adverse financial events within the next 12 months. Adverse financial events include external administrations, petitions to wind up, defaults, bankruptcies and court writs.
Mr van der Velde said significantly almost 3000, or 5.7 per cent, of these 50,000 at risk businesses are retailers.
“It’s not just large retailers that are feeling the effects of increased international and online competition, our advisors have seen a steady increase in external administrations across the Australian retail sector over the last 12 months.
“Our findings indicate thousands of retail businesses of varying sizes are at risk,” he said.
ASIC’s September 2015 quarterly statistics confirm the retail industry experienced a 9.8% increase in external administrations from the previous June 2015 quarter.
Please visit our Commercial Risk Outlook Report page to view a full copy of the March 2016 Report.
About the SV Partners Commercial Risk Outlook Report
The SV Partners Commercial Risk Outlook Report analyses the overall economic conditions of Australian business activity based on commercial bureau data over the previous five year period.
The Report predicts the likelihood of adverse financial events including external administrations, petitions to wind up, mercantile enquiries, defaults, bankruptcies, court writs and default judgements.
The Report categorises businesses into 10 risk bands ranging from low to high risk. High risk business behaviours include late payments on loans and debts and cash flow problems.
Data is compiled from over 20 million commercial sourced records and data assets from sources including the Australian Securities & Investments Commission, the Australian Bureau of Statistics, Business Directories, Consumer/Commercial Credit Bureau, Australian Post Office, Australian Business Register, Telephone Directories and Business Research.
The Commercial Risk statistics in this edition of the report are based on the latest bureau findings from December 2015 and predict default activity for the next 12 months.