Smiths City rescue leaves 115 staff in the cold

Sunday, 24 May 2020

Smiths City ran out of time to execute a 'turnaround' while its stores were closed by the coronavirus lockdown.

The bulk of retailer Smiths City has been saved after the company was put into receivership on Friday, but 115 of the chain's 465 staff will lose their jobs.

Smiths City Group was placed into receivership on Friday afternoon to help expedite the sale of most of the assets of the business to Colin Neal, founder of refrigerated logistics company Big Chill.

Neal has set up a new business, Smiths City (2020), to take over the chain.

Receiver Colin Gower of BDO Christchurch said the sale was completed 'late afternoon' on Friday,

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Receivership and sale removes another company from the NZX.

The sale, details of which first came to light on Monday, has seen Neal take over 22 of Smiths City's 29 stores, providing ongoing employment for about 350 of 465 Smiths City's staff.

But Gower confirmed Smiths City's seven remaining stores in Mount Wellington, Porirua, Lower Hutt, Kapiti and Whangarei, its Invercargill clearance centre and Christchurch outlet store, would close by Friday week.

One South Island employee said she and many other staff had been told on Thursday that they were losing their jobs.

She said she had been paid four-weeks' worth of the Government wage subsidy, rather than her full redundancy pay-out, and had not been paid out her holiday pay.

But Gower said the original Smiths City business which is in receivership did have sufficient funds to meet preferential claims from employees in full.

'We are currently confirming the amounts due to employees and anticipate making payment of outstanding holiday pay entitlements in the next two weeks,' he said.

The South Island worker said those employees who had been offered new jobs at the resurrected business had had their hours and pay reduced, with most now being paid $19.55 an hour.

A Smiths City (2020) spokesman declined to comment, saying people's terms and conditions were 'private to the employee'.

Former shareholders in Smiths City are out of pocket.

Smiths City shares last traded at 14 cents on May 17, valuing the company at $7.4m.

But trading was then suspended and the company told the NZX on Friday that its ordinary shares would now have no value.

Smiths City chairman Alastair Kerr said in a statement that while the outcome was disappointing for shareholders, the company's board was 'pleased to have been able to take steps to protect Smiths City’s legacy and the hundreds of jobs that will transition to the new business'.

Kerr said in a letter to shareholders that Covid-19 had a 'catastrophic' impact on the company, with the lockdown closure of its 29 stores for seven weeks preventing the company from turning around its fortunes.

'Unfortunately, the proceeds of the sale, combined with the value of residual assets, will not sufficiently cover the group’s liabilities to unsecured creditors,' he said.

Neal said in a statement that the transition of Smiths City to new ownership would open a new chapter in the chain's history.

“Commitments made to customers will be unaffected by the receivership and the sale.

'If, customers have paid for a product they will get the product,' he said.

'I am looking forward to working with Smiths City’s people and the communities in which we operate to build on the company’s position at the heart of New Zealand retailing.”