For 25 years, Napoleon Perdis owned and operated an iconic Australian cosmetics company. As a result of a changing retail landscape for the cosmetics industry, caused by greater online competition together with a failed investment into the US market, the business suffered unrecoverable financial losses resulting in the appointment of a voluntary administrator.
Background
Napoleon Perdis was a market leader in the Australian cosmetics industry. At its peak the company had 84 concept stores and over 750 independent stockists with an annual turnover of $52 million. The business was set up and run by the Perdis family with the flamboyant principal, Napoleon Perdis, leading, and promoting the business through a strong social media presence and the establishment of a makeup academy.
The business suffered irrecoverable financial trouble as a result of a substantial investment into the US market that ultimately failed.. The Company had invested in excess of $15 million in attempting to establish a presence in the US market. The business took steps to recover those losses and in the 2015 and 2016 financials years was able to partially achieve this. However, this focus by management on attempting to recover those losses also caused the business to not adjust its business model sufficiently to focus on the changing cosmetics retail landscape. The industry was moving towards a strong online presence with celebrities becoming very successful in selling their new cosmetic brands, and large mega cosmetic store formats such as Mecca and Sephora who began to dominate the Australian market The Company failed to adapt to the fast-changing nature of fixed-retail trading and experienced a substantial deterioration of its financial position in the 2017 and 2018 financial years.
As a result of this changing landscape the business failed to capture or protect their market position, adding to the already difficult financial woes it was suffering following the failed US investment.
The Perdis family and the business engaged advisers to attempt to restructure, then sell the business, but ultimately was unable to find a buyer under its current structure. As a result, they appointed administrators to undertake a restructure and resizing of the business.
At the time of my appointment as Administrator, the business was trading 55 concept stores and kiosks, alongside its online operations and over 500 independent stockists. The business had 370 employees in 4 states at the time of the appointment of Administrator.
How did we assist
During the voluntary administration process the following was undertaken:
- Assessment of viability of ongoing trading of 55 stores was undertaken with 28 stores being closed after the first weekend of trading. The balance of the 27 stores continued to trade during the Voluntary Administration process while a sale of the business was undertaken.
- Liaising with critical suppliers, logistics providers, banks, and business partners to ensure the smooth operation of services during the sale process.
- Continuous monitoring of the Company’s financial position, generating a net profit of over $2m in the first two months of appointment.
- A detailed review of the financial position of the company culminating in a sale of business campaign that involved marketing and negotiations with 41 interested parties in the purchaser of the business. A number of these parties were international.
- The preparation, review and investigation of a Deed of Company Arrangement proposal that resulted in the business being sold to a third party and a provide a return greater if the business was wound down and liquidated.
Outcome
The Deed of Company Arrangement achieved a sale of the business resulting in hundreds of jobs being saved and an iconic Australian Brand being restructured and rescued. The business continues to trade today with the new owners.
