Both Cue and Veronika Maine brands have been sold off for an undisclosed amount of money following rising costs and a reported net loss two years ago.
The brands have just been acquired by Hilco Capital, a special situations investor, asset-based lender and provider of outsourced retail services, including restructuring. The firm had helped restructure the Glue Store business in 2019 after acquiring it from JD Sports, before selling it off to Accent Group in April 2021.
“Hilco has significant international retail experience and will continue to support and invest in these much-love brands,” a spokesperson confirmed in a statement to Ragtrader.
Cue Clothing chief executive Simon Schofield is reportedly leaving the business in August as part of the deal, according to a news report by the Australian Financial Review.
Cue executive director Melanie Levis, daughter of founder Rod Levis, has recently left in the past week.
This came after former executive director Justin Levis announced plans to sue his parents, Rod and Lynette Levis, taking the family to the Supreme Court of New South Wales.
The Levis family had reportedly been in talks with Hilco since October, the AFR added, a few months after Dion Lee went into liquidation.
The deal comes amid rising costs for both brands. Ragtrader can reveal that Cue and Veronika Maine together suffered a net loss of $2.36 million in the 2023 financial year, according to the latest filings to ASIC by the Cue & Co Pty Ltd company.
That net loss came despite a slight lift in overall revenue of around $14 million to $106.2 million in FY23, and followed a net profit of $1.1 million recorded in the 2022 financial year.
The document indicates rising costs had drained away the company’s profits in FY23, including a $7 million surge in employee benefit expenses, which hit $28.5 million in FY23 compared to $21.5 million in the prior year.
Occupancy expenses also lifted, hitting $15 million, up from $11.2 million in the prior year.
There was also a slight nudge up in marketing expenses (from $2.9m to $3.1m), operating consumables (from $1.06m to $1.4m), admin (from $1.6m to $1.7m), and depreciation and impairment charges (from $8.1m to $8.9m).
Other key figures include a lift in inventories from $9.5 million in FY22 to $12.89 million in FY23.
Meanwhile, non-current lease liabilities lifted from $9.1 million to $21.1 million in FY23.
Despite the challenges on profits post-COVID, Cue & Co still retained $1.6 million cash in bank as of June 25, 2023. However, this had dropped by around $600,000 from FY22.
Rising costs have been reported across other fashion businesses, particularly in wages and occupancy costs.
Tuchuzy, which recently went into voluntary administration, saw the rent for its sole shop in Bondi rise from $265,000 in FY22 to $541,000 in FY25.
According to an Australian State of Office & Retail Leasing Report 2024, by Re-Leased and Market Lens, prime retail locations across Australia are seeing a resurgence of 10-year leases, with a 62 per cent increase from Q1 2023 to Q1 2024. This trend is driven by blue-chip retailers securing prime premises for their businesses.
"Retail is experiencing growth, highlighted by the resurgence of long-term leases from major retailers, indicating confidence in the enduring value of physical stores," Re-Leased CEO Tom Wallace said. "However, we also see a rise in short-term retail leases as under pressure retailers are unwilling to make a long term commitment in a challenging economic environment.”
Meanwhile, in June last year, the national minimum wage rose by 3.75 per cent, alongside a 0.5 per cent increase in superannuation.
While wage rises are great for consumer spending, National Retail Association interim CEO Lindsay Carroll indicated in previous commentary that this can add to the pressure many retailers are facing right now.
"Many retailers are still struggling to keep their heads above water. Business insolvencies have risen sharply in the last couple of years, and the Federal Budget was another opportunity for the government to show the ailing sector a little bit of support," Carroll said.
“We urge policymakers to focus on measures that boost investment and productivity, so, as Australia’s second-largest employer, retailers can continue to provide opportunity, job security, and sustainable growth for the economy, and maintain the momentum needed to drive recovery.”