MORE MAJOR RETAILERS AT RISK OF DICK SMITH FATE
Written on the 10 March 2016
THE demise of Dick Smith and Laura Ashley is just the beginning, according to one specialist accounting firm which says more major Australian retailers are at risk of crashing and burning in 2016.
Commercial data by SV Partners suggests 11 more Australian retailers with turnover of $100 million or more are at risk of suffering the same fate as the retail giants before them.
According to SV Partners March 2016 Commercial Risk Outlook Report, the unidentified retailers are displaying the same behaviours exhibited by Laura Ashley and Dick Smith prior to their voluntary administrations.
The data also shows another three Australian retail giants with turnover of more than $500 million are sitting in the second highest financial failure high risk category.
"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," says SV Partners managing director Terry van der Velde.
"Retail is the canary in the coal mine for the Australian economy. These businesses need to seek professional advice to make sure their finances are in order."
Van der Velde says significantly almost 3000, or 5.7 per cent, of the 50,000 Australian businesses expected to face adverse financial events within the next 12 months 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," he says.
"Our findings indicate thousands of retail businesses of varying sizes are at risk."
The SV Partners Commercial Risk Outlook Report analyses the overall economic conditions of Australian business activity based on commercial bureau data over the prior 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.
It categorises businesses into 10 risk bands ranging from low to high risk, and is compiled from more than 20 million commercial sourced records and data assets from sources including the Australian Securities and Investments Commission (ASIC) and the Australian Bureau of Statistics.
ASIC's September 2015 quarterly statistics confirm the retail industry experienced a 9.8 per cent increase in external administrations from the previous June 2015 quarter.