A-wear wants to become a wholesaler and close its House of Fraser concessions
Plan includes sourcing more stock from lower-cost locations such as India, China and Turkey
The rescue plan being proposed for the A|Wear chain of more than 30 fashion outlets, which secured interim examinership this week, includes ramping up its wholesale operation by supplying huge orders of low-cost clothing to bigger retailers and websites across Europe.
It is also proposing to close its nine concession outlets in House of Fraser stores in Britain, which it only opened earlier this year, as well as reducing the cost of its upward-only leases in Ireland.
Most of A|Wear’s stock is sourced from Britain. Jack Stein, a Canadian businessman who bought A|Wear from the Jesta group last month, is backing a plan to source more of its stock from lower-cost locations such as India, China and Turkey.
The company believes if it does this, it could cut prices by more than 20 per cent and crack the wholesale market.
Its wholesale operation, which accounts for just 10 per cent of sales, is run from Naas, Kildare.
In the independent accounts report that accompanied its examinership application, prepared by KPMG, it states that A|Wear cannot meet current demand from its wholesale customers because of cash constraints.
It says A|Wear is in negotiations with “one of the largest fashion outlets in Europe” for a new wholesaling contract.
“If [a deal] is successful, it would rapidly expand the market into which A|Wear can sell,” the report said.
A|Wear says its cashflow problems arose after its credit terms became restricted following the company’s previous receiverships. It said it is unable to meet wholesale demand from ASOS, the massive UK online-only retailer, because of stock shortages.
As it builds new relationships with cheaper suppliers, A|Wear believes its margins will improve. “The company will make wholesale order placements at the same time as own-buy orders, therefore achieving better pricing and margin per unit through purchasing higher volumes.”
The report reveals A|Wear has been threatened with winding-up petitions in recent weeks by creditors. It said it ran into trouble with Revenue this summer over VAT, and is on a payment plan. All customer vouchers will be honoured during the examinership process, the company told the High Court. Although it enters examinership with just €3,000 in free cash, it says it will generate free cash of €119,000 to get it through the 100-day protection window.
The report says A|Wear may close 11 Irish stores, but believes more could be saved if landlords co-operated on rents. The company was unavailable for comment.