West Pack Lifestyle, one of South Africa’s leading retail brands, has voluntarily initiated business rescue proceedings.
Matuson Associates announced that, on May 9, 2024, West Pack’s board resolved to enter into voluntary business rescue proceedings, and has nominated Grant Chittenden, Jenna Osborne and Lance Schapiro to be its joint business rescue practitioners.
These proceedings were officially filed with the Companies and Intellectual Property Commission on May 15, 2024, and took immediate effect.
“The board has recognised that the Company is financially distressed… specifically in that the Company is unable to pay its debts as they become due and payable now and within the succeeding 6 months,” wrote CEO Jose Da Silva said in a sworn statement kick-starting the process. West Pack, which has 52 stores across South Africa, Lesotho, eSwatini, and Namibia, employs 924 people, and the business rescue proceedings aim to save the company and these jobs. The numerous companies under West Pack include; West Pack Lifestyle, West Pack Lifestyle Distribution Centre, West Pack Franchise, Petzone, Petzone Franchise, Café Estreito, Café Estreito Franchise, and Beija Flor Investments.
West Pack explained that it landed in financial trouble because of its accelerated growth path, which strained its cash flows. It said the high capital cost of opening stores and the increased inventory mix depleted the company’s cash and ability to repay debt, while unsold inventory increased because of incorrect stocks and product mix. The company said that working capital constraints prevented it from buying the right products to fix its product mix. Additionally, West Pack said that South Africa’s struggling economy and load-shedding caused further hardship.
These abovementioned factors are cited as key contributors to the retailer’s turnover to steadily decline over the last few months, not meet its budgeted revenue. It resulted in West Pack trading at a loss, which has “put considerable pressure” on its cash reserves.
Despite these challenges, West Pack said there was a reasonable prospect of the company being saved and is now executing initiatives to restructure the business and drive its turnaround.
These initiatives include exploring offers to acquire some of West Pack’s assets or the full business, as well considering a corporate finance transaction and selling non-core assets to improve its financial position.
Operationally, it is looking at improving procurement procedures to achieve optimal stock levels and a better product mix and further reducing overhead expenses.
“By implementing the above initiatives, there will be a reasonable prospect of rescuing the company,” it said.
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