Commercial data shows retailers in financially high risk category.
Following the collapse of retail giants, Dick Smith and Laura Ashley, commercial data by specialist accounting firm, SV Partners, has revealed that 11 more major Australian retailers with turnovers of $100 million or more are facing the same high risk situation.
The ‘SV Partners March 2016 Commercial Risk Outlook Report’ analyses more than 20 million financial records from various sources relating to Australia’s 2.34 million operating businesses. The report identifies the sectors and geographical location of businesses most at risk of default during the next 12 months.
According to the report, 11 large unidentified retailers are displaying the same behaviours exhibited by Laura Ashley and Dick Smith prior to their voluntary administrations in late 2015. The data also shows another three Australian retail giants with turnovers of more than $500 million are sitting in the second highest financial failure high risk category.
SV Partners managing director, Terry van der Velde (pictured above) said it was important for the industry and governments to listen for and address the distress signals expected in the Australian retail industry during the coming months.
“Retail is the canary in the coal mine for the Australian economy,” van der Velde said.
“Our analysis shows that three other Australian retailers are sitting in the same high risk category as Dick Smith and Laura Ashley in December 2015, meaning we could see more big retail names in serious financial trouble in coming months.
“To reduce financial risk, we urge businesses to be vigilant in accounts collection, closely monitor cash flow, and make sure their financial reporting gives a complete and up-to-date picture of your financial situation.
“Most importantly, these businesses need to seek professional advice to make sure their finances are in order,” he said.
The report’s findings show nearly 50,000 Australian businesses are expected to face adverse financial events within the next 12 months. Adverse financial events include external administrations, petitions to wind up, defaults, bankruptcies and court writs.
According to van der Velde, almost 3,000, or 5.7%, of these 50,000 at risk businesses are retailers.
“It’s not just large retailers that are feeling the effects of increased international and online competition, our advisors have seen a steady increase in external administrations across the Australian retail sector over the last 12 months,” he said.