This was published 13 years ago
Borders, Angus & Robertson go into administration
By Eli Greenblat
Australian book chains Borders, Angus & Robertson and the Whitcoulls chain of newsagencies in New Zealand have been placed into voluntary administration by its private equity owners only a day after the Borders company in the US also collapsed.
The local companies have a combined staff of about 2500.
The failure of Borders in Australia is not linked to the woes facing its namesake in America - they are owned by different corporations - but both have suffered from the rise of internet book sales and constrained consumer spending.
REDgroup, a business that controls a portfolio of retail operations in Australia and New Zealand, is controlled by private equity firm PEP and has had a troubled few years during which it has breached a number of lending covenants with its banks.
BusinessDay has learnt that REDgroup was forced to call in administrators to the businesses this afternoon following a board meeting. Although its flagship Borders franchise is expected to remain open in the short term, its future in Australia and the jobs of its staff are now in doubt.
The outlook is similarly grim for Angus & Robertson, which has a corporate history in Australia that dates back to 1886 when David Angus and George Robertson opened a bookshop in Sydney.
New Zealand-based Whitcoulls is of even older vintage. Originally named Whitcombe & Tombs after its founders joined their businesses in 1882, according to the company's website.
Corporate undertakers
This afternoon Ferrier Hodgson partners were appointed voluntary administrators of REDgroup Retail Pty Ltd.
Ferrier Hodgson partner Steve Sherman said as far as possible it would be business as usual while the administrators conducted an urgent assessment of the business's financial status and to prepare for the first meeting of creditors, according to a statement.
During this period he called for regular Angus & Robertson, Borders and Whitcoulls customers to continue supporting their local outlets.
Mr Sherman said the administrators would be working closely with David Cowling of Clayton Utz.
The first meeting of creditors is likely to take place in the first week of March, the statement said.
An insider said book vouchers are likely to be honoured although the decision will ultimately sit with the administrators.
Separately, Malcolm Neil of the Australian division of e-book retailer Kobo assured customers their electronic versions of book would not be affected by the collapse of REDgroup.
Book retailing as been identified as one of the most exposed sectors to the rise of online shopping given the typically standard versions of books compared with clothing and footwear, for instance.
One industry analyst said REDgroup's demise suggests Australia may have more so-called "bricks and mortar'' book shops that the market can sustain.
“People look at bookstores as a lifestyle choice and a lifestyle choice is fine, if you don’t have to make money,” the analyst said.
Expansion
Borders opened its first store in Australia in October 1998 at the Jam Factory in Melbourne's South Yarra. A year later Borders opened its first New Zealand store in Queen Street, Auckland. Over the next eight years Borders opened new stores in Australia, New Zealand and Singapore.
Angus & Robertson is Australia's largest book retailer and has 103 directly owned stores and 61 franchised stores located in every state and territory.
Retailers have come under sustained earnings pressure over the last year due to higher interest rates, a return to thrift by consumers and a general increase in the cost of living.
Businesses such as Borders have been particularly hard hit by the rise in popularity of e-commerce sites that sell a vast range of books online at heavily discounted prices to traditional bricks-and-mortar shops. The strengthening Australian dollar has also encouraged shopping on overseas websites.
Debt strain
REDgroup has also felt the strain of the debt it took on as it was taken over by private equity and prepared for a sharemarket float.
In October REDgroup unveiled a full-year loss of $43 million, which it said was mainly attributable to non-cash inventory provisions as it completed its integration of Borders and rationalisation of old ranges.
Last year the company warned it was likely to breach two of its three of its banking covenants due to increasingly tough trading conditions.
egreenblat@theage.com.au, with Chris Zappone, BusinessDay