Direct Group – the parent company of TVSN, Innovations, Readers Digest and In-Fashion – is undergoing a restructure amid surging costs and a shift in ownership.
In two similar letters to its trading partners, both obtained by Ragtrader, Direct Group executive chairman Bernie Brookes confirmed the restructuring included redundancies and reducing the group’s cost base to “reflect a new business model”. No further details were provided.
These shifts across the business are in a bid to fulfil its outstanding obligations for payment, together with plans to return to on-time payment in line with agreed terms.
“To guarantee the future of the business, we are undertaking a significant restructuring and “right-sizing” of the Direct Group,” Brookes wrote in both letters. “We are currently closing the Entertainment Masters division and Fox Collections division and significantly reducing the Innovations Hardgoods business to a small core range of products.
The In-Fashion business and TVSN remain "as is", Brookes added, with all these changes expected to be completed by July 2025.
TVSN and Innovations sell a range of goods, including fashion. In-Fashion also includes Damart, Victoria Hill and Established brands.
According to Brookes, the group has been significantly impacted by subdued consumer confidence, a 22 per cent increase in Australia Post printing and postage costs, and the rise of international marketplaces.
“This impacted sales and subsequently resulted in temporary cash flow constraints,” Brookes confirmed.
Alongside this, Direct Group has also fielded key changes in the ownership of the business.
Brookes noted that the majority of the business was owned by Champ Private Equity (CPE), with a secondary shareholding held by the founders.
“A transition late last year saw control move to our lender, who now controls the company and remains the sole lender in the business,” he wrote. “The original founders still hold a share of the business.”
“As part of this transition, the lender has refinanced the business by providing a cash injection to ensure its future viability. This backing is an indication of the long-term viability of the business.
Direct Group remains headed by its CEO Algy Pereira and its CFO Steven bright. Brookes said they are committed to rebuilding the business, “and our lender's decision to provide further funding demonstrates the support for the new model.”
“I want to assure you that we remain committed to fulfilling our financial obligations,” Brookes concluded.
“Our new funding and the business restructuring will enable us to meet our obligations to you through a transparent payment plan. Our objective is that, over time, we will bring all outstanding payments up to date.”
One of the letters was sent separately to TVSN suppliers and another to the rest of the suppliers to Direct Group. Brookes further noted that TVSN suppliers are up to date, with Innovations partners requiring a payment plan, which has now been put in place following the cash injection.
The latest news comes amid a challenging landscape for fashion retailers and businesses, which includes the recent collapses of Ally Fashion and Bondi-based boutique Tuchuzy.