Popular sportswear retailer the Cross Trainer has entered a business rescue due to financial stress. Picture: Menlyn Park Mall website.
The effects of the Covid-19 pandemic have been labelled as one of the reasons for South Africa’s poor economic performance. Like dominoes falling, business after business is entering business rescue, with the latest victim being sportswear retailer The Cross Trainer.
The retailer is owned and operated by the Frame family under Frame Leisure Trading. The family said the lockdown restrictions was the beginning of the business’ difficult times. They struggled to maintain payments to some of the 67 stores they own.
George Nell from Corporate Business Rescue has been appointed as the business rescue practitioner to pull the retailer out of its woes. Newzroom Afrika reported the business voluntarily entered business rescue before it has to shut the doors of the stores they own.
Nell said the hundreds of people employed by the retailer will not be affected by the business rescue process. Under certain sections of the Companies Act, employees must be involved in the business rescue process and they will be protected.
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However, former employees of the retailer said difficult times have already begun for them as they were not informed about the decision of the business being rescued. “People arrived at the shop and we were told the shop will close, then the next day we were told that we are being retrenched.”
Another employee said she was told she was retrenched, however, when she went to the department of labour and employment to claim her money, she was told their system does not show she has been retrenched.
Some of those who lost their jobs in April said they have not been paid in full. “We are not getting our money, and our boss never discussed with us that he would be paying our money bit by bit. We had to take him to the CCMA and the labour department where he made promises that he will give us our money.”
Nell said they will look into the employees’ complaints while they find a way forward to ensure that they get the Cross Trainer stores back on their feet.
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Other popular businesses that recently entered business rescue include AutoZone, West Pack and Petzone. The Citizen previously reported the three businesses also attributed the beginning of their financial stress to the effects of the Covid-19 pandemic.
In an affidavit, AutoZone CEO Dion de Graaff outlined that before the pandemic, the company underwent a private equity transaction in 2014 and that is where the financial difficulties started. “Throughout this period of difficulty, AutoZone faced increasing debt service obligations, diverting money from operations for these funding needs.”
When it comes to West Pack Lifestyle, CEO, Jose da Silva said they have been on an accelerated growth path in the past four years which put a strain on the group’s cashflow. For this company, financial stress begun in 2023, due to the country’s economy and load shedding changing the buying habits of South Africans.
Petzone and Petzone Franchise, under the West Pack Lifestyle umbrella, also entered business rescue. Petzone has failed to service its debts for reasons similar to West Pack.
Da Silva aid one of the reasons for Petzone’s financial distress is the high capital cost of opening stores. A decision has since been taken to close non-performing stores as the company was trading at a loss.
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According to Statistics SA, they have seen fewer companies getting liquidated in 2024. “The total number of liquidations decreased by 5.5% in June 2024 compared to June 2023. Voluntary liquidations decreased by 12 cases during this period.”
The 2024 second quarter stats show that the number of liquidations decreased from 391 to 374 compared to the second quarter of 2023. There was also a decrease from 802 to 759 in the number of liquidations recorded during the first six months of 2024 compared with the first six months of 2023.
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