Liverpool-based retail chain Ethel Austin and sister chain Au Naturale has gone into administration, putting local jobs at risk in Morecambe and Lancaster.
This is the second time Ethel Austin has gone into administration in two years. In April 2008, the company’s financial woes resulted in the loss of over 250 jobs and the closure of 33 shops, including one in Preston, after the chain’s previous owners racked up some £24.8 million in debt and reportedly left the company with a poor track record when it came to paying suppliers.
Under such conditions, and given the precarious state of the economic recovery, it is hardly surprising its current owner, former MK One executive Elaine McPherson, has had problems securing funders, despite putting £5.5m of her own money into the business which has no banking facility.
The news is a blow for local jobs, with fears from some analysts that this could spell the end to the chain, even though it will continue to trade as MCR try to find a buyer, while warning they were “unable to rule out store closures and redundancies”.
The Independent reports the retailer and its sister homewares chain, Au Naturale, have fallen victim to worse than expected trading in January and a failure to secure a refinancing deal. Menzies Corporate Restructuring, the restructuring specialist, was appointed administrator of both chains yesterday.
“There is no doubt in our mind that the onset of the global economic crisis has hit the retail sector particularly hard,” said Geoff Bouchier, joint administrator at MCR in a press statement.
“As a consequence of this, the companies have struggled to secure funders, which in turn has impacted their ability to generate sales revenue.”
Mr Bouchier said the companies’ lack of capital had been compounded by the snow in January, which had deterred shoppers.
McPherson bought Ethel Austin for a reported £10m in April 2008, going on to buy Au Naturale within weeks, with plans to roll out a value empire, promising to restore the chain to its “former glory”. Last December, the company outlined plans to open 100 new stores that would amalgamate the Ethel Austin and Au Naturale brands.
Bizarrely, it was McPherson who put the company into administration and then took it over two years ago.
Despite her hopes, the Daily Telegraph notes that a source close to Ethel Austin said that after taking control of the company Ms McPherson was unable to secure hoped-for finance from two large banks and had put millions of pounds of her own money into the business to keep it afloat.
(There were hopes that a refinancing deal had been secured at the end of January, with reports the chain was understood to be in advanced negotiations with an unnamed investor and hoped to tie up a refinancing deal that it will use to inject working capital into the business).
The company has also suffered because suppliers have been unable to secure trade credit insurance. In January, the Independent reported suppliers had not received payments for pre-Christmas bills and were getting nervous about the retailer.
Despite taking the company into administration, The Independent reports that industry sources suggested McPherson is considering rescuing both chains again as part of a pre-pack administration. The Union of Shop, Distributive and Allied Workers (USDAW), the UK’s fourth biggest trade union, says it is already working with the administrators to secure staff employment.
Ethel Austin, founded in 1934, previously faced administration in 2004 and 2006. It operates 276 Ethel Austin and Au Naturale stores around the UK and employs a total of 3,714 staff, including 401 at the head office in Liverpool.
• If you’re am Ethel Austin customer, MCR say you will still be able to redeem gift vouchers purchased before 8 February, but only to pay for up to half of any transaction.
• The BBC reports customers will still be able to exchange unwanted goods bought within the last 28 days, but no refunds will be given
• Customers who have bought goods but not yet received them will need to put in a claim as an unsecured creditor. Those who paid by credit or visa debit cards may be able to get their money back from their card issuer.