Topshop collapse to cost CBA $8m

THE Commonwealth Bank is set to be hit with a bad debt charge of up to $8.1 million over a loan to failed fashion import Topshop.

A report into the $30 million collapse of Topshop and Topman in Australia has also blamed its downfall on poor decisions by its British parent, including trying to push outof-season stock on to shoppers here.

Among the key reasons for the collapse identified by administrator Ferrier Hodgson are “counter seasonal product issues due to the Arcadia ‘stock-push’ franchisee model”.

Arcadia is the multinational fashion empire backed by British billionaire Sir Philip Green whose stable of brands includes Topshop and Topman.

The Australian arm operated as a franchisee housed in a company called Austradia, whose directors included Rebel Sports founder Hilton Seskin. Ferrier Hodgson also singles out an “unfavourable” franchise agreement between Austradia and Arcadia as also dooming the fast fashion import to failure amid fierce competition from rival foreign retailers H&M and Zara.

This included charging high franchise fees that inflated Austradia’s cost base, meaning it was “unable to offer price points which appealed to the target customer base”, the report notes.

The CBA was Austradia’s biggest lender, owed $12.1 million through a secured loan at the time of the group’s collapse in May.

Ferrier Hodgson says secured creditors could expect to receive 33c to 39c back in the dollar, meaning the CBA would have to write off $7.4 million to $8.1 million. Employees will receive their full entitlements but unsecured creditors will receive nothing.

The CBA recognised $1.1 billion in bad debts for the year to June.