Competition, costs fell Snowgum

Rising rents and wages, stagnant sales and steep discounting from competitor Kathmandu are to blame for the collapse of adventure-wear retailer Snowgum, managing director Ross Elliott says.

Snowgum went into voluntary administration last week owing suppliers and staff $2.2 million after a dispute over rent with a landlord of one of its shops.

The chain started in 1926 as the Scout Shop but Mr Elliott and other investors bought it from the Scout Association in 2004. It has 17 company-owned stores and eight franchised stores, four or five of which may be closed this week.

"A large number of Snowgum retail stores are in high-rent shopping centres, all of which increase their rents by 5 per cent or more each year under their five-plus year rental agreements, during a period when sales in discretionary retail have declined in Australia," Mr Elliott said.

"On top of the rent, wages have increased substantially over the past 10 years to the point where a Sunday award casual employee now costs the business over $40 an hour to employ," he said.

Snowgum would have been "OK" if sales had kept growing, but turnover slumped in 2008 during the global financial crisis and "sales have never really recovered".

Administrators Glenn Franklin, Jason Stone and Petr Vrsecky, of Lawler Draper Dillon, will honour outstanding gift cards and are seeking expressions of interest to buy the business, closing on Friday.

"We're confident we can sell it as a going concern, but if we can't the value of it declines significantly," Mr Franklin said.

The retail sector has been hit with a wave of collapses since the global financial crisis, especially in fashion, including stores such as Brown Sugar, Bettina Liano, Ed Hardy, Ojay, Colorado and Fletcher Jones. Bookshops Borders and Angus & Robertson also fell into the hands of administrators.

Karenlee Nominees, a trustee company controlled by lawyer Paul Brand and his godson, former Liberal Party Victorian state director Julian Sheezel, represents the landlord of Snowgum's Chapel Street, Prahran, store.

In a writ filed with the Victorian Supreme Court on October 1, Karenlee Nominees said one of the companies in the Snowgum group, Snowgum Australia, owned $15,245 in rent and should be wound up.

"There's been a problem that recurred ... over a period of time in history," Mr Brand told BusinessDay.