LG Australia who in the last financial year only managed a profit of $13K from nearly a billion dollars turnover is facing the prospect of $25M exposure, after the collapse of retailer Clive Peeters with debts in excess of $150 million.
In the consumer entertainment category Sony, Panasonic and Sharp are also exposed, while Samsung is believed to be free of any exposure after the Company refused to deal with Clive Peeters. Several vendors including LG have credit insurance with QBE Insurance who is believed to be exposed for tens of millions of dollars.
Two years ago ChannelNews predicted that Clive Peeters would fail with questions now being asked about the past performance of Clive Peeters management.
Between 2007 and 2009 the Company failed to identify a shortfall of $20M which had been systematically stolen by a former Payroll Manager Sonia Causer, who over the two year period was able to establish fake employees due to a lack of Company security procedures.
Greg Smith the CEO and major shareholder in Clive Peeters, was the former CEO of the Vox Retail group which owned Billy Guyatts and the Chandlors chain of stores. This retail group collapsed after expanding in a similar way to what Clive Peeters has been trying to do with limited capital.
Back in 1970 Smith was a partner in a medium-sized accounting firm that looked after the interests of Billy Guyatts. In 1971 Smith quit accounting to become CEO of the Vox retail group.
In an effort to expand Smith urged his board to buy the Rick Hart group in Western Australia as well as the Michael King stores in Victoria.
As a result of Clive Peeters being placed into administration the Rick Hart Group in WA has been placed into voluntary administration.
Next week receivers Phil Carter and Daniel Bryant of corporate advisory firm PPB is set to try and sell Clive Peeters. Terry Smart, CEO of JB Hi-Fi, said that his group is not interested in buying the Clive Peeters business. He said, “This has been coming for a long time, the retailer is of no interest to us, however, it is not good for the industry”.
Phil Carter of PPB said that he will conduct a formal sale of Clive Peeters’ assets, and had already received a significant number of inquiries from potential buyers. Mr Carter noted that some potential purchasers wanted to buy the entire business as a going concern.
“The initial signs certainly appear promising,” he said.
According to the Australian newspaper Gerry Harvey, executive chairman of furniture and electrical chain Harvey Norman, yesterday said he would be interested in buying several of Clive Peeters’ more profitable stores, but not the entire company.
“They have so many loss-making shops that can’t be turned around,” Mr Harvey said.
, Mr Carter said PPB was “stabilising the business operations”, with all 1300 staff remaining in employment across the network of 45 stores and three warehouses. “We will be trading on a business-as-usual basis as far as possible in the circumstances.”
Several retailers have said that “If no one sticks their hand to buy Clive Peeters the industry could witness as major fire sale” similar to what happended in the USA when Circuit City collapsed. This they say could impact both Harvey Norman and JB Hi Fi as well as Dick Smith.