2. 2
EXECUTIVE SUMMARY
For the purposes of this report “to evaluate a company that has gone into liquidation in the past 7
years” we have chosen to look at A|Wear a high street fashion retailer in Ireland. In this research
paper we will not only look at the brand A|Wear but also the characteristics of why many
companies go into Liquidation.
The report will cover the Financial and non-financial impact of a company that has gone into
liquidation incorporating the following headings:
General Evaluation of why companies fail
History of our chosen Company
An analysis of the company post its 2007 buy-out
Internal Factors
External Financial Environment
Non-Financial Impact of the collapse of a company
Our report seeks to understand the reasons behind the closure of A|Wear. Whilst there is a lack
of financial data available beyond 2010, we have been able to research the company through a
series of journals and reports from various websites and media outlets.
In order to understand why a prominent retail outlet like A|Wear failed to succeed, we looked at
similar companies like Zara, H&M and Penny’s and their recipes for success in an ever changing
economic environment. It is important to note that many of the difficulties experienced by
A|Wear occurred during the financial downturn.
In our analysis of the company we found that A|Wear’s relevancy in the retail market failed due
to the following:
A lack of innovation and understanding of customer needs
Macro – Economic Factors
High Rents and Locations
3. 3
TABLE OF CONTENTS
FINANCIAL MANAGEMENT ASSIGNMENT 1
EXECUTIVE SUMMARY 2
INTRODUCTION 4
ANALYSIS & EVALUATION 4
GENERAL EVALUATION OF WHY COMPANIES FAIL 4
HISTORY OF A-WEAR 5
ANALYSIS OF A|WEAR FOLLOWING ITS BUY-OUT IN 2007 5
INTERNAL FACTORS 6
EXTERNAL FINANCIAL ENVIRONMENT 6
NON-FINANCIAL IMPACT OF THE COLLAPSE OF THE COMPANY 7
CONCLUSIONS AND RECOMMENDATIONS 7
BIBLIOGRAPHY 8
MINUTES OF MEETINGS FINANCIAL MANAGEMENT ASSIGNMENT 9
4. 4
INTRODUCTION
In order to evaluate why businesses fail we need to look at many different factors which can
contribute to the failure. In this research paper we will not only look at the reasons behind the
failure of the brand A-Wear but also the main causes of why companies go into liquidation.
ANALYSIS & EVALUATION
GENERAL EVALUATION OF WHY COMPANIES FAIL
Failure to understand your market and customers.
It is vital to understand what your customer wants and what price they are willing to spend for
your product. You must effectively communicate and listen to your target audience if you are to
be successful in business. A company must have an understanding of their customers’ needs and
desires if they are to be continually successful. Once this is done the company must be able to
communicate effectively with their customers and a clear line of communication is established.
Not having an online presence.
In this digital age all companies should have an online presence and digital identity. If a
company does not have a website they are unable to market themselves to a huge audience and
are missing out on a great opportunity. The website should be professional looking and well
designed. Customers should be able to easily navigate the site and be able to inform themselves
of the company’s products and services. Social media is playing an ever increasing role in
business and a Facebook and Twitter account is also vital for success.
Poor Financial Planning
A lot of companies fail through poor financial management. Businesses need a healthy and
regular cash flow to get through the year. Over spending and taking on too much debt can cause
a company to fail. A company must also ensure that creditors pay in a reasonable timeframe.
Businesses must be reactive to the market
A business must innovative and keep up with the changing trading environment. It must also be
able to react to external pressures such as the arrival of fresh competition or political and social
changes.
Planning
A business must have a clear business plan. Within this plan they must look at the product they
are supplying and ensure there is a clear need for the product. By ordering your products well in
advance suppliers have the opportunity to source materials and offer competitive rates.
5. 5
HISTORY OF A-WEAR
A|wear was an Irish company operating in the Republic of Ireland, Northern Ireland and UK
over a period of years from 1966 to 2014. A|wear was chain of women’s clothing stores and also
operated internationally through its online store www.awear.ie and www.awear.com
It was first opened in Limerick in 1966 after 7 years Galen Weston – Brown Thomas Group
invested in it and as a result the company expanded nationwide. In 1985 it was rebranded from
Gaywear to A|wear. A|wear offered to their customer’s high-street clothes and accessories, to
the latest trends at the best prices. Prices of clothing was affordable, and clothes were good
quality.
Galen Weston/Brown Thomas Group owned a|wear for over 40 years and eventually decided to
sell it in 2007. Brown Thomas had expected to sell it for €85 million but it was sold for only €70
million. The Company was sold to a management buyout (MBO) team, which was backed by a
British private equity firm - Alchemy Partners. The Company was placed in receivership a
further 3 times before it finally ceased operations in January 2014.
ANALYSIS OF A|WEAR FOLLOWING ITS BUY-OUT IN 2007
Due to a lack of financial data for the company from 2010 onwards we were unable to ascertain
if there was a particular large investment or undertaking by the company that contributed to its
failure. However as evidenced below we can see the chain of events that led to continual
investments being made to keep the company afloat and its eventual closure.
After 4 years (2011) Alchemy Partners announced that as a result of continued economic
downfall and high-retail rents in Ireland a|wear would be placed receivership.
2011 Hilton Capital Group Ireland Ltd purchased the company and its debt
On 15th February 2012 Hilton Capital placed A-Wear into receivership
A-Wear operations were purchased by the Flack Group on 16th February 2012 and agreed
to continue to operate the 32 stores in the Republic of Ireland
October 2013 A-Wear’s parent company announced it was going into examinership. On
28 November 2014 all A-wear stores in the Republic ceased operations.
6. 6
INTERNAL FACTORS
When A|Wear and its debt was purchased by the Hilco Group in 2011 they began the process of
re-negotiating leases and rents with landlords. It would appear that whilst trying to reduce these
costs, they were more focused on the reduction of assets and paid less attention on the brand
itself. They continued to employ the services of designers like John Rocha, Marc O’Neill and
Peter O’Neill. Despite their ad campaigns offering 15% discounts to students and referencing
celebrities who used their products, A|Wear still failed to compete with similar retail outlets such
as Penny’s and H&M. Many retail outlets at the time were using a fast fashion approach
delivering “designs from the catwalk quickly to capture current fashion trends”. (Reference
https://en.wikipedia.org/wiki/Fast_fashion)
If we look at how companies like H&M and Penny’s attribute their success through the recession
they state that: (reference www.primark.com/en-ie/ourethics &
http://about.hm.com/en/About/facts-about-hm/about-hm/business-concept.html#cm-menu)
in-house design
no middlemen
large purchasing volumes
buying the right products from the right markets
efficient logistics
cost-consciousness in all parts of the organisation
EXTERNAL FINANCIAL ENVIRONMENT
For over 40 years A-Wear was a prominent fashion retailer in the Irish Market offering leading
Fashion trends at high street prices. The purchase of A-Wear in 2007 by the Alchemy Group,
seemed an ideal investment on paper, 32 stores nationwide offering a unique clothing line with
virtually no competitors of a similar style. Following the Financial Crisis in 2008 the retail
sector found itself under increasing pressure. The diminishing labour market, tight credit
imposed by the banks and higher taxes reduced consumer’s appetite for spending. The overall
spending slowdown reflected a weakening fall in consumer sentiment. This especially applied to
the fashion industry.
A-wear struggled through this broad downturn in the retail industry. Along with this the
company was put under increased pressure from new foreign competitors H&M and Zara. These
foreign competitors came into direct competition with A-wear in crowding the 18 - 35 middle
range women’s fashion market. In 2011 H&M recorded an 8% increase in sales. They became a
formidable match for A-wear.
During the Economic Boom Ireland had one of the most expensive retail rents in Europe.
Retailers were signing multi year leases, with penalties for cancelation. Many businesses signed
leases at the height of the boom. With the downturn in 2008, these high rents became
unsustainable. A|Wear blamed high rents and increasing competition for the reasons for their
difficulties.
7. 7
NON-FINANCIAL IMPACT OF THE COLLAPSE OF THE COMPANY
The non-financial consequences when a company fails are far more reaching than the company
has ceased trading and closed their doors. In this section we will look at the impact on people,
fixed assets and subsequent knock on effect on the wider business community. It is difficult to
say if the closure of A|Wear had this impact, generally these are possible causes when companies
fail.
People – When we talk about people we can look at both direct & indirect employees of
the company.
In many cases when a company goes into liquidation, Direct Employees may not
receive advance notice of termination of employment and may not receive
redundancy payments. We are unsure due to the sacristy of information if the 358
employees of A|Wear received redundancy payments. Although having looked at
similar cases for example Clery’s we can see no redundancies were paid to date. As
often happens former employees are unable to find work straight away which results
in further Government spending in the form of social welfare payments.
Indirect Employees – those contracted to supply services to the company i.e. staff
canteens and their suppliers, cleaners, main suppliers, security etc. There is a knock
on effect to those supplying services to the company. There may be outstanding
invoices left unpaid and if a product has been supplied they may not be able to
retrieve that product once the liquidators have been appointed. Sometimes this is the
supplier’s sole client which can result in the collapse of the supplier’s company.
Abandoned & Derelict Properties –More and more Retail properties were abandoned
which lead to derelict properties.
Items purchased through the store cannot be returned and any gift cards are now useless.
Education – employees maybe attending courses at the time of collapse and subsequently
may not be able to continue.
Directors’ and investors are also burned when a company collapses. Prior to the change
in the law in 2015 their properties may have been at risk, they are not eligible for social
welfare payments and find themselves in major financial difficulties.
CONCLUSIONS AND RECOMMENDATIONS
A|Wear defined their target market as high fashion for 18 – 35 year olds. At a time when
A|Wear began to fail we can conclude that from a value proposition point of view A|Wear failed
to reassess their target market. When we factor in recession and high immigration (25+ year olds
who have graduated) the target market should have been 18 – 24 year old single females living at
home. These were the demographic with a disposable income and no financial constraints.
8. 8
BIBLIOGRAPHY
Elliot, L 2011, ‘Global financial crisis: five key stages 207-2011’, The Guardian, 7 August,
Available at: http://www.theguardian.com/business/2011/aug/07/global-financial-crisis-key-
stages [Accessed 11 January 2016]
The Journal, 2011, ‘High retail rents costing jobs, say stores’, The Journal, 25 November,
Available at: http://www.thejournal.ie/high-retail-rents-costing-jobs-say-stores-289348-
Nov2011/ [Accessed 10 January 2016]
Power, B 2011, ‘Penney’s Pinching: Penney’s a/w 2011’, The Independent, 10 September,
Available at: http://www.independent.ie/style/fashion/penney-pinching-penneys-aw-2011-
26771832.html [Accessed on 11 January 2016]
Mac Cabe, R 2011, ‘Penneys A/W 2011 in living colour’, The Irish Times, 25 July, Available at:
http://www.irishtimes.com/blogs/fash-mob/2011/07/25/penneys-aw-2011-in-living-colour/
[Accessed 12 January 2016]
Digital Desk, 2012, ‘H&M reports 8% sales lift in 2011’, Sunday Business Post, Available at:
http://www.businesspost.ie/hm-reports-8-sales-lift-in-2011/ [Accessed 12 January 2016]
Dublin links, ‘A-wear Dublin stores’, Available at:
http://www.dublinks.com/index.cfm/loc/5/pt/0/spid/26B62F96-D767-476D-
A8D3B1B9E1F161BB.htm [Accessed on 12 January 2016]
Trading Economist (2016), Ireland Unemployment Rate, Available at:
http://www.tradingeconomics.com/ireland/unemployment-rate [Accessed 11 January 2016]
Central Statistics Office (2016), Available at: http://www.cso.ie/en/index.html [Accessed 09
2016]
The Journal, 2011, ‘Retailers step up Grafton street banner war on high rent’, The Journal, 26
August, Available at: http://businessetc.thejournal.ie/retailers-step-up-grafton-street-banner-war-
on-high-rents-210692-Aug2011/ [Accessed 11 January 2016]
The Journal, 2015, ‘Watch: Locks changes in Clerys as shocked workers told all the jobs are
gone’, 12 June, Available at: http://www.thejournal.ie/clerys-sale-2158180-Jun2015/ [Accessed
09 January 2016]
Kirwan, K 2015, ‘The small Business Column: Clery’s Closure’, Irish Examiner, 22 June,
Available at: http://www.irishexaminer.com/business/smallbusiness/the-small-business-column-
clerys-closure-338272.html [Accessed 09 January 2016]
9. 9
Hillen, S 2011, ‘Ghost Shops’, Photo Ireland, 24 August, available at:
http://2011.photoireland.org/program/ghost-shops/ [Accessed 10 January 2016]
http://about.hm.com/en/About/facts-about-hm/about-hm/business-concept.html#cm-menu
https://en.wikipedia.org/wiki/A_Wear
http://www.primark.com/en-ie/our-ethics
Minutes of Meetings Financial Management Assignment
Lecturer Siobhan Cassidy
14/12/2015
A-wear is the company agreed upon to use for group assignment
Division of assignment as follows under the various headlines outlined
General Evaluation of why companies fail – Daniel, Kamila
A succinct history of the organization and its objectives – Kamila
Analysis of the success or failure of a large project/investment made by the
company i.e. opening of new stores etc. – Valerie, Kamila
Internal Factors causing the collapse of the company – Valerie, Daniel
Evaluation of the impact of the external financial environment at the time of
the collapse – Daniel, Vlad
Non-financial impact of the collapse of the company – Valerie, Vlad
Recommendations on what could have been done differently by the company
– All
11/01/2016
Discussion on the various headings and the lack of information on some parts.
Agreement to do a comparison with similar brands
Agreed a format for the assignment
Whilst the different headings where assigned to individuals there was a sharing of
information across all topics and an input by all. Everybody contributed equally to the
assignment.
Compilation of report was done by Valerie and reviewed and edited by all
Once editing commenced we had to condense the report to fall in line with the word
requirement for the assignment and almost 650 words were removed leaving the essential
content to complete the assignment.
Between researching, preparing the document, editing and reviewing we would
approximate 90 hours were spent completing this assignment.
