Discount clothing chain Ethel Austin and its sister firm Au Naturale went into administration today, putting over 3,700 jobs at risk.
Administrators from MCR took control of the company and its sister firm Au Naturale, a homewares chain, after attempts to arrange a refinancing deal collapsed. It hopes to find a buyer for the two companies, but admitted that this could be difficult in the current economic climate.
"The joint administrators are trading the companies in administration in the short term with a view to finding a purchaser for the businesses as a going concern. We are reviewing the financial position of the companies and are, at this stage, unable to rule out store closures and redundancies," said Geoff Bouchier, MCR partner.
Jonathan De Mello, director of Retail and Property at Experian, notes that smaller towns where Ethel Austin had a bigger presence will be the worst affected. "Given the administration of Woolworths last year which had a major adverse effect on smaller towns – with many ex-Woolworths stores still lying vacant – the administration of Ethel Austin would be a major blow, given Ethel Austin take fairly large stores in prominent high street locations in these centres," said De Mello.
"The UK’s smaller towns have been hit by declining footfall and increased vacancy rates over the last two years, and Ethel Austin’s woes represent yet another setback for them.”
Founded in 1934, the company now operates 300 stores around the UK. Its management had hoped to secure fresh working capital to keep the business running and settle bills with its suppliers, some of whom have reportedly not been paid since before Christmas. But the adverse weather conditions in January had a damaging effect on trading, which restricted the companies' cash flow.
