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Cape Town - Retailer Stuttafords is a salvageable business and management believes it would not have to be liquidated, CEO Robert Amoils told Fin24.
"Our business is a sizeable one and, therefore, at this point in time we do not believe a liquidation is a contemplation given the indicative support from a number of our stakeholders. We don't believe a liquidation process will happen at all," said Amoils.
Stuttafords announced on Monday it will apply for voluntary business rescue after numerous measures failed to mitigate the effects of the tough economic climate and the impact of customer migration to lower-priced products.
The retailer was founded in 1858 and employs about 1 000 people.
"Over the last few months - specifically since February 2016 - our business was subjected to a dramatic decline in turnovers and full margin sales. A number of headwinds also included onerous lease obligations and escalated capital expenditure costs due to rand devaluation," he explained.
"Customers were under a lot of financial pressure and our cash flows relative to budget anticipations were nowhere near where they were meant to be."
He emphasised that management certainly did try to avert applying for business rescue, but despite a lot of support - including from its banking partner - it could not avert the process of going into business rescue on Friday last week.
If the proposed business rescue plan - which will be presented early next year - is not accepted by stakeholders, if will be adapted until it is approved.
READ: Stuttafords seeks voluntary business rescue to secure future
According to Amoils, business rescue would provide the company with the necessary latitude to responsibly and efficiently streamline its operations and recapitalise its balance sheet.
A business rescue plan, if adopted, will not only minimise stakeholder and supplier losses and uncertainties, but also enable a rapid and effective repositioning of the company’s operations and financial structure, he said.
Amoils explained to Fin24 that the retailer has done a lot of positive work and spent a large amount of money over the past few years to reposition the business to attract younger black consumers.
"Unfortunately, given various dramatic declines in consumer demand over the last few months, all that good work - no matter how rewarding it has been - has not been sufficient to stem the underlying financial position of the company, which anticipated a far better outcome over the past six months," said Amoils.
"The consumer is under a lot of pressure at the moment and costs have been escalating due to rand devaluation and local inflation. That created a double edged sword. We have also been subjected to a lot of fierce competition," said Amoils.
"Our biggest challenge has been the length of our supply chain. We are unable to immediately or in a very short space of time reposition our stock holdings and or brand offering. It means we have to just manage what we have got and can't change purchasing patterns at least 9 months out."
Yet he is adamant that there is light at the end of the tunnel.
“We are optimistic that the breathing space that business rescue affords will result in the most viable and financially sound outcome for suppliers and employees. South Africans will also continue to enjoy the unique and luxurious shopping experience that has become synonymous with the Stuttafords brand,” said Amoils.
PODCAST: Fin24's Matthew le Cordeur chats to Amoils about the possible business rescue of Stuttafords
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