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Colette collapses as retailers hit the skids

Store front with closed sign
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ASX retailers are on watch following the collapse of jewellery and accessories chain Colette by Colette Hayman. The group behind the chain has been placed into voluntary administration in the latest signal of the dire conditions facing retailers. Administrators commented that Colette was a victim of the weak retail trade environment.

The Colette business 

Colette’s store network consists of 140 stores across Australia and New Zealand, with 300 Australian staff members and annual gross sales of $140 million. The brand was known for its handbags, jewellery, sunglasses and other accessories, and was reportedly selling some 3 million handbags a year. Stores are to remain open while administrators seek to recapitalise or sell the business. 

Retailers close doors 

Colette is the latest in a line of retailers which have shut up shop in the wake of poor trading conditions. In just the first few weeks of 2020, a number of retailers have collapsed or announced closures.

Harris Scarfe announced plans to close 21 stores in January after being placed in receivership in December. This was followed by EB Games’ announcement that it planned to shut at least 19 stores. Fashion retailer Bardot plans to close 58 stores across Australia by March, while Jeanswest entered voluntary administration in January. Educational retailer Curious Planet has also announced plans to close 63 stores in Australia after efforts to find a buyer were unsuccessful. 

Some signs of life 

There are, however, some bright sparks in the retail landscape. Shares in Temple & Webster Group Ltd (ASX: TPW) are up 20% today following the release of the home furnishing retailer’s first-half results. Temple & Webster reported a 50% growth in revenue, exceeding market expectations, while earnings before interest tax depreciation and amortization (EBITDA) was $2.3 million, well up on the $1 million reported for 1HFY19. The retailer reported 45% active customer growth, with revenue per active customer also increasing. 

Jewellery and accessories retailer Lovisa Holdings Ltd (ASX: LOV) has yet to report its half-year results but performed strongly last year despite the retail downturn. Lovisa reported a 15.3% increase in revenue in FY19, with gross margin of 80.5%, up from 80% the previous year. Gross profit increased by 16% to $201.4 million, with a net increase of 64 stores over the year. An additional 31 net new stores were opened between the end of FY19 and October last year. 

Foolish takeaway

The brutal trading environment means Colette may not be the last retailer to collapse this half. The trend of retail closures will likely continue as retailers struggle with high rent and wage costs, online competition, and reluctant shoppers. 

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Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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