Lisa Ho hit the wall last week. It was only last month that the fashion designer jettisoned plans to list on the stock exchange.
A public float is a most excellent way to cheat the grave. This time it didn't work. Still, the demise of Lisa Ho's corporate incarnation by no means spells doom for the fashion label, nor for the impresario herself.
If the history of rag-trading in Australia is any guide, the banks, the Tax Office and the suppliers will take a hit and Lisa Ho will trade on.
Bettina Liano, Charlie Brown, Danny Avidan, Jayson Brunsdon, Wayne Cooper's Brave, the Ksubi boys, Belinda Seper, Ian Nessick's YPV, Ruth Tarvydas and sass & bide are a handful of fashion identities that spring to mind.
All their businesses have been "rebirthed" in some way; most shaking off their debts and tax obligations thanks to a voluntary administrator and emerging serene as a butterfly from the chrysalis.
Indeed, Lisa Ho's own husband, Philip Smouha, underwent an administration of his own in 2010 when his Smouha Fabrics empire imploded owing $26 million to St George (also Lisa Ho's banker). He now trades as Tex 'N' Jean.
It could be said that Smouha had not structured his business as well as he might have. He was forced to sell the couple's $17 million house in Bellevue Hill, and put up for auction four Picassos and a Norman Lindsay watercolour.
His wife's eponymous fashion house owed Smouha $442,728, although her liability was reduced to $83,258. Even insolvency practitioners have a heart.
Had Smouha structured his rag-trading operation as, let's say "optimally", as others in the industry, no personal assets would have been on the line. Others have managed to get their business back unshackled by pesky debts and tax bills - not to mention annoying lease obligations. Clean, as it were.
It is in the leases that many Australian designers seem to go awry; in their penchant, that is, for empire-building by retail outlets. It is an unnecessary and risky vanity in the age of the internet and department store concessions.
Famed British couturier Alexander McQueen boasts just one store in London, on Bond Street. Yet Lisa Ho has four in Sydney alone, besides another six across the nation's capital cities.
Melbourne designer Bettina Liano bit the dust last year after breaching a lease. "What I was paying for the Little Collins Street store was exorbitant," she told industry mag Ragtrader. "It cost me over $20,000 a month but this store in SoHo is less than $10,000 a month. And there are people here. In Little Collins Street, there's no traffic, it's tumbleweeds."
The jeans queen closed her four stores here, did a deal with John Marshall's Apparel Group and promptly expanded into New York.
In premium fashion, the mark-ups are fancy and demand is fickle. A gown which retails for $700 in Australia might cost $70 in China. It begs the question of why designers such as Ho bother to roll out retail stores besides their concessions with the David Jones and Myers of the world.
Australia is simply too small and too pricey a market.
Property research reports from CBRE show Melbourne's prime retail rents are on par with Zurich. The answer to this proliferation of retail stores partly lies in the unpoliced insolvency regime in this country. There is often little penalty, rather sometimes a large reward, for appointing a voluntary administrator and having one's slate of liabilities wiped clean. Almost always, the founder is one of the first and largest creditors to the failed group. And rarely is there anything left for others, especially the banks and suppliers.
It is an industry rib-tickler that the ATO is still waiting for its maiden return as creditor to rag-trader's insolvency.
More broadly in retail, the inexorable rise in high street rents has debilitated small business for two decades. Yet those the retailers charge as rapacious landlords are supported by government policy - the favourable tax laws. Were there no negative gearing, there would be less incentive for landlords to leave their shops empty for months at a time rather than reduce their rents.
For landlords, it is no big deal to leave a shop without tenants as they pick up a higher tax break on the loss of rental income generated by holding the property empty.
This doesn't just affect the small end of town. There is a view that the Lowy family's sell-down in retail juggernaut Westfield reflects the fact that the wealth transfer from tenant to landlord has reached an unsustainable peak.
There are answers. Ending negative gearing for vacant shops could revitalise the retail sector. If a shop were not leased within three months then deductions could cease until it was leased. Could this change the market dynamic and have landlords competing for tenants at a greater discount to rentals in Zurich? Could it deliver tax to government coffers, as all rent is taxable, and reduce the cost of taxpayers subsidising negative gearing on empty, unproductive commercial and retail property?