Harris Scarf: Deloitte Trying To Flog A “Pig With Lipstick”
Deloitte, the appointed receiver to failed retailer Harris Scarf are now trying to “flog a pig with lipstick” under the guise of “Project Genie” claims one angry appliance supplier who is now working with insurers to mitigate their losses.
Several appliances and homeware suppliers are upset after secured creditors were “looked after” with suppliers to the failed retailer left carrying millions in potential losses.
Also upset are landlords who are being asked to “play ball” with Deloitte who have told prospective buyers that they intend to close 40 of the 66 stores and that Harris Scarf is an “unearthed retail diamond” and an iconic “mini-major” homewares and apparel retailer with a database of more than 1.4 million unique customer records and 402,000 loyalty scheme members according to a sales document.
“What Deloitte is doing is trying to flog a pig with lipstick. It’s a business that has failed numerous times and if someone does b buy it the chance of success is extremely risky” said one insider.
Up until the 2nd of December, Harris Scarf was owned by Greenlit brands who sold their general retail merchandise business including Harris Scarf to Allegro Funds.
Many suppliers are still miffed about the manner in which Harris Scarfe was sold by Greenlit Brand’s to Allegro last month.
The sale occurred without the landlords’ consent and Allegro straight away went about trying to secure rent reductions and exit leases.
“The former Steinhoff and now Greenlit Brands knew that Harris Scarfe was a basket case with failed stores in Queensland WA and NSW this which is why they virtually gave the business away,” they said.
Greenlit Brands whose CEO Michael Ford was the former CEO has not commented on the failure of Harris Scarf.
Ford was the CEO of The Good Guys prior to joining the scandal ridden Steinhoff organisation, who in a bid to get away from the stench of scandal in the South African Company renamed the Company Greenlit Brands.
According to JB Hi Fi insiders The Good Guys was “A mess” when JB Hi Fi took over and Terry Smart was appointed CEO to replace Ford.
“Smart has done a great job turning around a business that was poorly run” said a senior JB Hi Fi executive.
Yesterday JB Hi Fi shares hit $38.71, 12 months ago they were $21.40.
When Harris Scarf was sold to Allegro Funds the CEO of Greenlit Brands Household Goods was Debra Singh the former CEO of the Woolworths owned Dick Smith.
Woolworths sold the Dick Smith electronics brand and its 325 stores to a private equity group for $20 million to Anchorage Capital Partners in 2012, at the time and under Singh’s management the Company was losing money.
In the financial year prior to the sale Woolworths booked a $420 million cost related to its restructuring of the Dick Smith business, in 2015 Dick Smith collapsed with debts of over $400M.
In 2017, Greenlit Brands acquired Fantastic Holdings Limited and appointed Debra as an Executive Director to the Board.
According to Deloitte 40 per cent of Harris Scarfe’s stores will close under a major restructuring, more than 1,600 people are employed by Harris Scarfe.
The receiver is hoping that this will be enough to get the business away to a prospective buyer who is prepared to take on the risk of trying to resurrect a business that some claim has been “dying for years”.
According to AAP Deloitte told potential buyers in the sale flyer that Harris Scarfe is “exiting its tail of unprofitable stores…returning focus to its profitable heartland.”
Most of these unprofitable stores are in Queensland, NSW and Western Australia and were opened during a period of aggressive expansion under a previous private equity owner, Momentum Capital.
The store closures are expected to reduce sales from about $380 million to $285 million, according to the flyer, but will reduce costs and lift earnings before interest tax depreciation and amortisation to $16 million.
These calculations are all based on Harris Scarfe landlords playing ball.
According to the Financial Review, sources claim that most of Harris Scarfe’s woes stem from the unprofitable stores in the northern states and its Debenhams store in Melbourne, which is due to close in the New Year.
The most likely buyers are private equity investors, but sources say an acquisition might make sense for Myer, enabling the department store chain to create a two-tier model and replace Myer stores with reconfigured Harris Scarfe stores in regional and suburban shopping centres.