Horror outcome after retailer’s $45m collapse

Nearly 460 former Godfreys employers could receive just 73 cents on the dollar for money owed to them after the vacuum cleaner retailer’s collapse earlier this year, while creditors seeking to recover $45 million in debt will get no Nothing.

In January, the 90-year-old retailer fell into administration and attempts to find a buyer to resurrect the company failed after it struggled against competition from larger rivals such as Harvey Norman and Amazon

The result was the closure of all 160 stores and online operations at the end of May, while around 635 employees were reportedly left without work.

Employees are owed more than $10 million, including annual leave, pay in lieu of notice, long service leave and severance pay, a report from administrators noted.

Meanwhile, 25 customers were left with $18,000 out of pocket, the report revealed.

The company’s management blamed the reduction in consumer income caused by higher inflation, rising interest rates and a shift of customers to cheaper alternatives.

They also pointed to an inability to raise prices due to competition and higher financing costs due to the need to raise borrowings to finance operating losses and fund franchise acquisitions.

Management also highlighted a “change in the sales product mix, where sales of high-margin products have declined, particularly vacuum cleaners, and have been replaced with sales of lower-margin products, including robots.”

Godfreys had lost large sums of money as its financial performance “deteriorated” significantly in 2023 and 2024, an administrators’ report lodged with ASIC revealed, with losses worsening to $44.3 million in 2023.

In the seven months ended Jan. 31, Godfreys racked up losses of $22.3 million, the report said.

“Decreasing sales volumes coupled with rising costs across a number of categories have had adverse effects

has impacted the group’s margins and resulted in losses totaling $66.7 million over the past 19 months,” the report reads.

Sales fell significantly by 9% and actual average monthly sales revenue was $1.3 million lower in the 2024 financial year compared to the 2023 financial year, the report adds, while Godfery’s operating expenses were $18.2 million above gross profits.

PwC’s report attributed Godfrey’s demise to a reduction in sales, an increase in the cost of acquiring inventory, an increase in transportation costs, an increase in wages and rent costs, a failure to reduce head office costs and failure to close poorly performing retail stores to stem losses.

It also noted that the average cost of stick and robot vacuum cleaners increased by 8% and 26%, respectively.

“Furthermore, since the 2021 financial year, the group has acquired numerous franchise stores to convert to operate as group-owned stores, which has exacerbated the group’s decline in business performance,” company administrators said , Craig Crosbie, Robert Ditrich and Daniel Walley of PwC. he said.

“Most acquired franchise stores eventually became loss-making.”

Closing stores was also not feasible, the report noted.

“It is unlikely that the group had sufficient financial resources to fund a store closure program which would have required payment of severance and other employee entitlements, as well as compensation to landlords for any breach of lease agreements,” the administrator said .

The report showed there were 36 franchise stores that had been purchased in the past three and a half years at a combined cost of $27 million.

It also revealed that 264 creditors collectively owed nearly $45 million will not see a cent after the company’s demise and these include vacuum cleaner makers TEK, Bissell, Electrolux and EcoVacs and a number of owners. The Australian Taxation Office is also due to receive $883,000.

PwC presented three options to creditors in its report: advising against liquidation of the company’s assets and instead encouraging a deal with a secured lender, 1918 Finance.

The report found that in the event of a liquidation, a “low” estimate of 73 cents on the dollar would be given to employee entitlements.

Although 55 parties expressed interest in Godfreys, 26 were provided with a summary information pack, access to the data room and instructions on the sales process and six bids – no buyer was found for the retailer, administrators noted in their report .

They found that some parties lacked the capacity to find funding, while other offers were of “little or low value”.

Godfrey’s, one of the “world’s largest vacuum cleaner retailers”, had opened its first store in 1931, and at the time of its collapse the company operated 141 stores, with a further 28 outlets operated by franchisees.

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