The fate of Australian fashion label Dion Lee will be decided next week at a second creditor’s meeting on August 29.
The latest news comes from a second creditor’s report tabled this week by dVT Group, and seen by Ragtrader, with administrators calling for the winding up of the luxury fashion house amid no proposed deed of company arrangement (DOCA).
However, this does not imply the cessation of business operations. The administrators noted that they and dVT Group intend to continue running the Dion Lee business even after the fashion house is wound up, at least until September 30, 2024, with the goal of finding a buyer. This is, of course, depending on whether creditors choose this option in the first place at next week’s meeting.
A DOCA could also still be executed by the directors or third parties. The creditors may also instead call to end the administration and return the company to its directors.
According to the administrators, the latter option is neither “a practical nor a commercial proposition” given Dion Lee is insolvent.
“Of the available options and given no DOCA has been proposed at the time of drafting this report, we note in accordance with Section 439A of the Act that the liquidation of the Companies [Dion Lee] is recommended,” the report read.
“Furthermore, given the financial position of the Companies, ending the administration is not a viable alternative.
“In light of the above, it is our opinion that it would be in creditors’ best interests to wind up the companies at the reconvened second meeting of creditors.”
The report also revealed that the luxury fashion label has made $3.2 million worth of sales during its voluntary administration, which began in May.
Minus core expenses, the net profit from these sales was $1.6 million, with the documents confirming that the total sales amount to 20,000 units sold, which includes 6,334 online orders, 6,043 of which have been shipped so far.
Online sales, including Shopify sales and Paypal sales, amounted to over $1.5 million, with retail sales hitting $1.34 million.
The brand also made just over $9,000 in international sales.
The largest expense during the voluntary administration so far was wages and salaries, amounting to $599,000.
As part of the continued business operations, dVT administrators are also considering relocating the latest ‘Pre Fall 2024’ stock to Australia. This stock is currently located at various factories in Portugal, France and China.
The administrators have engaged an external consultant regarding this stock to formulate an aggressive sale strategy, with a view to achieving the best outcome for creditors.
On hand in Australia, Dion Lee has approximately 15,000 units.
“The External Consultant is assisting us with the negotiation of the sale of the Companies’ business and assets to enable us to compare a possible refined offer against each class of asset,” the report read. “The External Consultant is also assisting us with considering the commerciality of relocating the ‘Pre Fall 2024’ stock which is currently located at various factories in Portugal, France and China, to Australia to complement the sale of the archive stock.
“Based on the External Consultant’s projection and the level of stock, it is anticipated that should we bring this stock to Australia, we may have to continue operating DLE’s business for a period of time after the reconvened meeting of creditors [next week] depending on the timing of the shipment of the stock.
“We are considering the possibility of changing the business model to maximise the returns and reduce the operational costs of the business. The landlords have been notified of our intention to continue operating from the retail stores.
“We endeavour to provide sufficient notice to all staff, in due course.”