By Jessica Yun
Vacuum cleaner retailer Godfreys has collapsed into administration and announced it will shut 54 stores and axe nearly 200 jobs in the next fortnight, leaving its 93-year history of trading hanging in the balance.
The business, founded in 1931 during the Great Depression, has appointed PwC Australia as voluntary administrators after struggling to recover from the COVID lockdowns and contending with a tougher economy and lower sales.
“Sadly, like many retailers, we have been heavily impacted by consumer confidence and spending due to the economic era of high inflation, rising interest rates, and intense cost-of-living pressures,” said Jane Allen, the daughter of Godfreys co-founder John Johnston, in a statement.
“We are also still suffering from the unprecedented business disruptions of the COVID-19 pandemic.
“While it’s deeply regrettable, we need to take this action. This decision has been made in the best interests of our employees, together with our customers – it’s about securing the company’s future.”
Godfreys operates 141 stores and has more than 600 staff across Australia and New Zealand, with a further 28 stores run by franchisees.
Administrators Craig Crosbie, Robert Ditrich and Daniel Walley will continue running the business, but are undertaking an “immediate operational restructure” that will shutter 54 stores and axe 193 staff positions over the next 14 days.
“Like many retailers, Godfreys has faced a challenging economic and operating environment. Lower customer demand amid cost-of-living pressures, higher operating costs, and increased competition have all taken a toll on profitability, with some stores more impacted than others,” Crosbie said in a statement.
“Our aim is to move quickly to restructure Godfreys to preserve as much of the business and as many jobs as possible. We intend to trade the restructured store network and sell the business and assets as a going concern, with strong interest expected from prospective buyers.”
The first meeting of creditors will be held on February 9.
University of Sydney adjunct lecturer and retail consultant Gareth Jude said Godfreys had been in decline for two decades, and the company had failed to keep up with innovation.
Dyson, which has led the vacuum market, was not stocked by Godfreys for some time. The company was also slow to stock the cordless or “stick” vacuum, which has become popular with consumers.
In the meantime, Jude said,“more aggressive” white goods retailers such as Harvey Norman and Bing Lee have captured market share, as have online entrants with the rise of ecommerce.
“Back in the ’80s, they were very strong on price, they were very strong on promotions, and they seemed to capture the mood of the time. They were with the consumer then … But now, they obviously haven’t been, because there’s not enough revenue to sustain them,” said Jude.
“It’s been death by a thousand cuts.”
Founder Godfrey Cohen and business partner Johnston sold the business in 2006 to private equity investors CCMP Capital Asia and Pacific Equity Partners for about $300 million.
The company listed on the ASX in 2014 but was plagued with falling sales, high turnover among senior management and a declining share price.
Godfreys’ collapse comes after other businesses have recently slid into voluntary administration, including cake maker Sara Lee and cleaning products company Hiro Brands, which manufactures Organic Choice, Trix, Orange Power and Aware Sensitive.
Retailers are hoping for a pause on interest rate hikes this year to boost consumer confidence and encourage spending.
Data released by the ABS on Tuesday showed retail turnover slid 2.7 per cent in December compared to November, driven by declines in household goods and department store sales.
AMP chief economist Shane Oliver said this decline was steeper than expected, indicating that shoppers brought forward their Christmas shopping to Black Friday sales in November.
“It is likely retail sales will remain weak in the months ahead in response to ongoing cost-of-living pressures. In fact, the noisy data over the past few months has partly reflected the growing trend of consumers seeking out bargains and discounts which is a sign of weakness in household consumption,” Oliver wrote in a note.
Lower retail sales means businesses will be less likely to hike prices, which will help to further dampen inflation, he added.
“Given that inflation is still running at a high pace, we are likely to have seen a fifth consecutive quarter of retail volume contraction. Real retail spending per capita remains around 4 per cent down over the year.”
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Source: Thanks smh.com