SurfStitch all at sea as administrators are called in

Stu Nettle
Swellnet Dispatch

The inexorable slide of online retailer SurfStitch hit a milestone today with the directors calling in adminstrators to oversee company affairs. The company says it has "reluctantly made the appointment due to several significant external challenges including two Class Actions, protracted litigation, and an ASIC investigation."

With its shares already weak, SurfStitch has deemed their situation untenable, the combined effect creating a "high level of uncertainty impacting the companies trading position."

With insolvency issues looming the SurfStitch board has called in administrators, FTI Consulting. The announcement only concerns SurfStitch's listed and holding company, its online businesses - including Magic Seaweed, Stab, Swell and Surfdome - will continue trading as normal.

FTI Consulting, said they'll "work closely with the operating businesses to preserve value for stakeholders."

SurfStitch shares have been suspended since late May while the company considered the implications of a $100 million class action launched by aggrieved shareholders. Law firm Quinn Emanuel is running the class action on behalf of shareholders, while another law firm, Gadens, run a concurrent class action.

As well as two class actions, major shareholder Crown Financial has taken legal action against SurfStitch over a failed content sharing deal. The Australian Securities and Investments Commission is also investigating Surfstitch's disclosures in connection with the content sharing deal.

SurfStitch listed at $1 in late 2014 and was trading at a record high of $2.09 in November 2015. It shares had fallen 90 per cent to 22¢ by June 2016 following three profit warnings. The stock closed at 6.8¢ before being suspended.

Comments

thermalben's picture
thermalben's picture
thermalben commented Thursday, 24 Aug 2017 at 3:52pm

Yet another fascinating development. 

Also, less than a week ago, there was an interesting quote across a couple of news sites - it appears Ruslan Kogan could be eyeing for a takeover of SurfStitch, much in the same way he did with Dick Smith in March 2016 after it was placed into administration in January of that year, and then failing to secure a buyer in February.

"Ruslan Kogan expects a number of online retailers will collapse next year, and his eCommerce empire is ready to pick up a bargain.

The founder and chief executive of Kogan.com says he's on the lookout for acquisitions after unveiling strong annual results that smashed expectations.

"Over the last decade there has been a lot of online retailers who have done a great job in raising money building a website and then blow all the money on marketing and building a brand," Mr Kogan told AAP.

"As a result of that, we see a lot of those falling over in the coming year and that creates an opportunity for Kogan.com."

He said Kogan.com had the systems, inventory and now the experience, through its $2.6 million Dick Smith acquisition in April last year, in saving businesses.

However, he declined to give any names.

Chief financial officer David Shafer said the company was a bargain hunter and would only buy if the business was good value and earnings accretive.

Surf and sporting goods retailer Surfstitch and homewares and furniture business Temple & Webster are two high-profile and publicly traded loss-making online retailers."

http://www.news.com.au/finance/business/breaking-news/ruslan-kogan-eyes-potential-takeovers/news-story/77a1df2c5119eef9cfc4fd6785a5f7bf

kaiser's picture
kaiser's picture
kaiser commented Thursday, 24 Aug 2017 at 7:35pm

Not sure the Kogan supply chain will work as effectively as a proxy for surfstitch. He doesn't have a generic or own brand for this type of product. I'm unlikely to buy a kogan carbon flex set of fins, to be honest. Or a kogan K Bomb wetty

thermalben's picture
thermalben's picture
thermalben commented Friday, 25 Aug 2017 at 8:24am

Kogan bought Dick Smith, which is a standard electronics retail which stocks some 30-40 consumer brands (Canon, Dell, Pioneer, Sony, Samsung etc).

Its latest financial results were impressive on paper - net profit up 800% on last year, and EBITDA up 320% - which was partially attributed to the relaunch of Dick Smith online. So, I think they've got the backend systems and processes to make it viable.

IMO, the big change Kogan would bring to SurfStitch would be in its marketing strategy. 

kaiser's picture
kaiser's picture
kaiser commented Friday, 25 Aug 2017 at 9:07am

Yeah true... but Kogan was already an online electronics retailer before it bought DS and made it an online electronics retailer.

If anything, acquiring DS may have brought some brand cred to their house label, so there was synergy and upside to the existing business.

Then there's the looming behemoth known as Amazon. Dunno if they'll be able to set themselves apart and remain competitive. In the end I'm happy to see anyone give it a go, but usually these acquisitions seem to be more of a supply chain and logistics play

thermalben's picture
thermalben's picture
thermalben commented Friday, 25 Aug 2017 at 9:09am

Agree with your points. Kogan is however expanding into Telco services (mobile, internet) and Travel, so is thus showing some diversity across its business model.

But yes, Amazon is the big unknown here.

kaiser's picture
kaiser's picture
kaiser commented Friday, 25 Aug 2017 at 11:41am

Didn't know about the travel angle, although not a bad idea for an online platform... and they don't really have to deliver anything to the end user!
Will be very interesting to see a) what is offered for surfstitch and b) what the administrators eventually let it go for... it will give a good clue to just how much impact is expected from the arrival of Amazon. If Kogan is the buyer then I suspect they'll just be paying for a Queensland warehouse and not much else.

DaButton's picture
DaButton's picture
DaButton commented Friday, 25 Aug 2017 at 1:45pm

can't see the travel market being kind to them, already a massive field with highly established players. Cant really see how the are so well positioned for a run on booking.com as you stated above there is no warehousing, logistics to it. Its a contract and reach deal in travel and who has the most coin will win. Something tells me that when this hits and the dust settles online will be a very very different place.

Amazon has also been "coming" for years now, i would say they are playing the long game (underwater drone ports, patents on sky based warehousing systems etc). Thus realising that the next tech advancement (blockchain) is coming and is what will actually change the internet. When this happens picture using one website (google, facebook maybe) to do absolutely every task on the net, from shopping at coles online to reserving a table at ur local restaurant. Blockchain is a coding development that will enable every piece of software in the world to be 100% compatible with every other piece of software in the world.

Like a button up

velocityjohnno's picture
velocityjohnno's picture
velocityjohnno commented Thursday, 31 Aug 2017 at 3:03pm

underwater drone ports, sky based warehousing?

I must be living under a rock or something, those sound fricken cool! Is the sky based warehousing like the big flying aircraft carrier in "X-men"? Or more like a republic Star Destroyer - the smaller ones that could go into atmospheres?
Will I be able to ping a drone sub from say San Fransisco to my underwater caves under the cliffs and get Cool Stuff?
And what will power them? If you generate a sufficient magnetic field from a spinning metallic plasma (and contain it) you can anti-grav, but you must be pulling some form of power from the aether to get an aircraft carrier size vessel into the sky.
I hope to see all these things. Bags first wave after we terraform Mars.

poo-man's picture
poo-man's picture
poo-man commented Thursday, 24 Aug 2017 at 9:55pm

So what happens now? Where next for this ongoing debacle? Any chance the two founders might have to stump up some of the money they put away?

poo-man

terrance's picture
terrance's picture
terrance commented Friday, 25 Aug 2017 at 12:31pm

poo-man, what happens next? Darn good question.
Depends what the appointed administrators find (or don't find).
A few things you can guarantee is that it will be de-listed from the ASX, the administrator will be looking at what do to with any assets of the business (sell, maintain, write-off), shareholders have done their lolly and the administrators will be working with their indemnity insurers (re director's liability) and their lawyers re the ongoing class actions, etc.

cd's picture
cd's picture
cd commented Friday, 25 Aug 2017 at 4:27pm

Is there a risk to customers purchasing goods at the moment? Are they able to continue trading?

poo-man's picture
poo-man's picture
poo-man commented Friday, 25 Aug 2017 at 6:54pm

Yep the risk is that if the administrators decide that it's a dead loss and puts it into receivership then if you want to return something or exchange something or have something faulty and want a refund then you'll be out of luck

poo-man

fong's picture
fong's picture
fong commented Sunday, 27 Aug 2017 at 7:57pm

Harsh . they never set out too fail.

dr-surf's picture
dr-surf's picture
dr-surf commented Monday, 28 Aug 2017 at 9:05am

Rus Kogan would Kick Ass with Surf Stitch. He runs a lean machine that is beholden to online success. What he's buying is the Marketing over spend Surf Stitch and the like have spent on Launch. Surf Stitch and the Swell private label/brand would stand alone from other Kogan businesses. Ruslan could do "The Surf Market" in his sleep.

Optimist's picture
Optimist's picture
Optimist commented Tuesday, 29 Aug 2017 at 6:50am

Best to just go shopping at your local surf shop , board stores and factories and forget the online circus. Its nice to touch and feel and talk to people. Usually the same price anyway. The specials are in each shop regularly as well. If nothing local, take a trip to the city or Goldy and indulge in a surf gear feast....Go the humans!

fong's picture
fong's picture
fong commented Friday, 1 Sep 2017 at 12:03am

Now billabongs fucked as well.

800 million lost last year.

No ones buying what they are displaying. Its all about the kurdasians not pro surfers

freerider.'s picture
freerider.'s picture
freerider. commented Monday, 4 Sep 2017 at 10:25am

Is the surf industry headed for a close out on the reef? All you really need is a board and some wax.

thermalben's picture
thermalben's picture
thermalben commented Thursday, 12 Oct 2017 at 9:23am

Breaking news this morning - SurfStitch have sold Surfdome (UK equivalent, whom they acquired in 2014 for a reported AU$45 million).

"SurfStitch's administrators have agreed to sell Surfdome to a British-based private equity backed sports and adventure retailer, Internet Fusion, for £7 million ($11.8 million), including an upfront cash payment and a deferred consideration."

http://www.afr.com/business/retail/surfstitch-sells-surfdome-ending-glob...

thermalben's picture
thermalben's picture
thermalben commented Sunday, 15 Oct 2017 at 12:05pm

In an ironic twist, AFR are reporting that "Billabong is tipped to be the frontrunner to buy the ailing online surf and skate wear retailer".

http://www.afr.com/street-talk/billabong-drops-in-on-surfstitch-sale-pro...