22 August 2024 – Popular sportswear retailer The Cross Trainer has entered the business rescue as South Africa’s poor economic performance and reduced consumer spending weigh on retailers.
The family-owned and operated retailer first opened its doors in 1995 and has grown since then to a total of 67 stores with hundreds of employees.
The Cross Trainer has been run by the Frame family under its investment vehicle, Frame Leisure Trading.
Cash-flow problems stemming from the Covid-19 pandemic and its lockdowns resulted in the company failing to keep up with increasing operational costs.
This resulted in some stores being shuttered by landlords due to disputes over rent payments.
Ultimately, the company officially entered business rescue on the 14th of August before having to shut down any of its stores.
The company appointed George Nell from Corporate Business Rescue as one of its business rescue practitioners.
Nell told Newzroom Afrika that The Cross Trainer’s employees will be protected throughout the process as he focuses on saving the company.
“For sure, there are difficult times ahead, and negotiations should take place with employees as well as relevant trade unions,” Nell said.
Some former employees said they were not aware the company was under financial stress or would be retrenching staff. Others said they had not been paid since April.
Nell said the business rescue practitioners will look into the employees’ issues and try to ensure the company will survive to protect current employees.
“Sometimes the situation is that the procedures just follow one another so quickly that they cannot follow the legitimate procedures, but we will go back and see what uh what happened, and we will rectify what the company did wrong,” he said.
The business rescue practitioners will give an update on the labour issues in a few weeks’ time and outline a plan to save The Cross Trainer.
The Cross Trainer is far from unique in folding under the pressure of South Africa’s lacklustre economic growth and subdued consumer spending.
Almost 760 companies have entered into liquidation since the start of this year as rising debt-servicing costs take up a greater share of household disposable income.
While many of the businesses that have been liquidated so far have been relatively small, the pressure is beginning to tell on larger companies.
Petzone, AutoZone, and WestPack are some of the more well-known brands to have entered business rescue in an attempt to stay alive.
AutoZone is the largest privately owned automotive parts retailer and wholesaler in Southern Africa with a presence in South Africa, Namibia, Swaziland, and Botswana
The company has 214 wholly-owned retail branches and 33 member-owned franchise branches.
AutoZone published a notice on 5 July 2024 that its board of directors adopted a resolution on 1 July 2024 to voluntarily commence business rescue proceedings.
It said its financial distress dates back to 2014, following a private equity transaction funded by debt.
In May, West Pack Lifestyle, one of South Africa’s most recognisable retail brands, has entered voluntary business rescue proceedings.
West Pack comprises numerous companies, including West Pack Lifestyle, West Pack Lifestyle Distribution Centre, and West Pack Franchise.
The group’s related companies further include Café Estreito, Café Estreito Franchise, and Beija Flor Investments.
West Pack employs 924 employees, and the business rescue proceedings aim to save the company and these jobs.
The company was financially distressed and was unlikely to pay its debts when they became due over the next six months.
West Pack explained that it landed in financial trouble because of its accelerated growth path, which strained its cash flows.
West Pack said there was a reasonable prospect of the company being saved and is executing initiatives to restructure the business and drive its turnaround.
On 15 May 2024, Petzone and Petzone Franchise were placed under business rescue after the board of directors agreed to it on 9 May 2024.
Petzone operates 21 stores and employs 104 staff members. Petzone Franchise has 34 stores.
Like its holding company, West Pack, Petzone is in financial distress and will be unable to pay its debt when it is due.
To save the company, Petzone is exploring offers to acquire its assets or the company as a whole. Source: BusinessTech
