Could Harveys swoop on Sleep City’s remains to bolster electrical sales?

By Claire Reilly

Sleep City announced last month that it was entering into voluntary administration, with parent company Furniture and Bedding Concepts Limited appointing Price Waterhouse Coopers as receivers for both the Sleep City and Everyday Living brands.

The retailer is just one of a number of companies to feel the pain of a struggling retail economy in the past months, with WOW Sight & Sound also announcing it was going into administration, and Dick Smith being formally offered up for sale by parent company Woolworths Limited.

Price Waterhouse Coopers partner Michael Fung announced last month that Furniture and Bedding Concepts and its subsidiaries would continue “operating in a ‘business as usual’ mode” while PWC investigated the causes behind the administration. “We believe that the current soft retail environment is a contributing factor,” he said.

However, at the end of February, the administrators announced their decision to “wind-down the businesses over the course of the next six to eight weeks,” with liquidation sales announced to “maximise the return from the companies’ existing stock for the benefit of creditors including employees”.

At the end of this six-to-eight-week period, the company’s 450 employees are to be made redundant.

The websites for Sleep City and Everyday Living both currently display basic information on the company’s clearance sales, but a news page intended to provide information to creditors and suppliers offers scant details. The information page offers links with a “Memo to Customers” and a “Notification to Suppliers”, however both links lead to non-existent pages.

When contacted Sleep City/Everyday Living to request more information for customers and suppliers, a spokesperson for the company refused to comment.

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Following the announcement of Sleep City’s receivership, Harvey Norman released its half-yearly profit results. Buried in a statement accompanying the results was this interesting note: “The recent placement of the Sleep City Everyday Living brand into administration should be a positive for our brands.”

Harvey Norman’s profit results also revealed that the company is experiencing strong results from its furniture and bedding departments, while electrical and IT continue to struggle in the current retail climate.

In the company’s outlook, a the company commented that “franchising operations within Australia has continued strength from furniture and bedding categories,” but that “the audio visual and information technology categories will continue to remain challenged in the next 6 months".

According to RBS Equities director and retail analyst, Daniel Broeren, Harvey Norman’s overall sales results for the past six months were “boosted by its higher performing furniture category”.

Perhaps Harveys is keeping a watchful eye on the collapse of Sleep City with the hope of offsetting the losses keenly felt in the underperforming consumer electronics and appliance departments?

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UPDATE: contacted Harvey Norman for comment on the collapse of Sleep City and the role it was expected to play in driving customers towards Harveys' furniture and bedding business.

"We expect some of this market to come to Harvey Norman," said a spokesperson for the company.

Regarding the 450 Sleep City/Everyday Living staff who are to be made redundant in the coming weeks, the spokesperson said there may be roles for them to take at Harvey Norman, but these would be judged on a case-by-case basis.

"Franchisees will no doubt be approached by Sleep City/Everyday Living staff," said the spokesperson. "If they are looking for staff at the moment they will happily interview anyone with the necessary experience."

And as to whether the failure of the retailer was a sign of a broader decline affecting the entire industry?

"We don’t know the background to the collapse of Sleep City/Everyday Living brands," the spokesperson said.

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