King of Knives collapse: administrators to cut stores and staff

Ben Hurley Reporter

King of Knives collapse: administrators to cut stores and staff

Published 20 August 2013 12:02, Updated 20 August 2013 13:08

The King of Knives chain will continue to trade as administrators assess the state of the business.Photo: Kitty Hill

The creditors of national homewares franchise King of Knives will meet this Friday to determine the future of the company after it went into voluntary administration last week. The 25-year-old business, which has 60 stores in Australia and New Zealand, has been struggling through a difficult retail climate in recent years. But it was a decision from its bankers to withdraw finance that pushed it over the edge. “That put them in a cash crunch position which the directors had to fund personally, and they did,” says Antony Resnick, partner at appointed voluntary administrator BRI Ferrier. “We’re currently meeting with the key landlords to try to keep the group alive. We’re trading all stores at the moment.“We’re trying to save jobs, and save as much of the business as possible which has a positive benefit for all stakeholders.”

The way through will be discussed this Friday but Resnick says a deed of company arrangement to the creditors is likely, which will mean a better dividend will flow to them than would be the case if the business went into liquidation. The company directors are the main shareholders.

The company’s four New Zealand stores are likely to be closed, Resnick says. “Liquidators were yesterday appointed [in New Zealand] to do what they can with those stores, with our support,” Resnick says.

There will also likely be closures among the 40 company-owned stores in Australia, although the franchises will not be affected.

Franchise model not to blame

Resnick says the business model will need to be re-assessed but it is “too early to speculate” what changes might be enacted. “There will need to be a reassessment of the company’s business model which has been strongly supported by the company’s directors. The franchise model seems to work well, with a central franchisor sourcing and supplying stock.”

The chain was founded by veteran retailer Ron Baskin in 1987, and was sold to ASX-listed RCG Corp– the owner of Athlete’s Food – in 2004. RCG sold it back to a Baskin family-led consortium in 2007 for $4.5 million, citing poor performance in the company.

Kevin Moore, chief executive of Asia-Pacific retail strategy consultancy Crossmark, says more government assistance is needed to help service-based businesses.

“We’ve lost 80,000 jobs in retail over the last six months because shoppers are uncomfortable spending money,” Moore says. “If you have a discretionary spend, if you’re in the white goods industry or knives, it’s tough times.”

“The mining sector has cooled, and we need to be migrating ourselves over to being a services economy again. It needs help, we need a government to make retailing more flexible. You can’t employ people on weekends without paying penalty rates. There’s a whole lot of productivity measures that lie in the hands of government.”