Retail chain Postie Plus, announced today it had called in the administrators after its bankers decided to cut its losses. Markets writer Christopher Adams looks at what's gone wrong.

Read here: Postie Plus in administration after bank pulls support

(1) Market pressure

Clothing retailer Postie Plus, which has 82 stores across New Zealand, has struggled to find its place in a rapidly changing retail market and has been losing market share as a result.

At the company's annual meeting in December chief executive Richard Binns said customer numbers had been declining for the last three years.


"We have not been responding to customers' demands for product or service," Binns said.

He also said Postie Plus was facing increased online competition, including from overseas web-based retailers.

(2) Losses and debt

The retailer's loss swelled to $3.7 million in the six months to February 2 from $1.8 million in the same period a year earlier.

Chairman Richard Punter said today that trading losses were ongoing, despite a restructuring of the business and recent improvements to gross margins and market share.

Postie Plus said in April that it was in breach of its lending covenants and expected to remain so "for the foreseeable future".

The company's debt reached $18.1 million in early February but was reduced to $12.1 million later that month after the company sold its SchoolTex school uniform business to The Warehouse Group.

Postie Plus' bank has now withdrawn support after deciding that it cannot extend its facilities to cover ongoing losses.

(3) Distribution challenges

A poorly executed outsourcing of its distribution centre - part of the company's head office relocation from Christchurch to Auckland - hit Postie Plus hard in 2013.

The retailer's full-year loss blew out to $11.6 million last year.

Punter said the company had been advised that it had "proper grounds" to pursue a damages claim in relation to those losses.

(4) Exit strategy

Postie Plus has been on the hunt for a new cornerstone shareholder to recapitalise the company or an outright buyer.

However, a new investor or buyer failed to materialise.

As a result, the company has appointed David Bridgman and Colin McCloy, of PwC, to run the business under administration.

Postie Plus said the company will continue to trade while negotiations continue towards selling the retailer as a going concern.

Employees had been told that they will remain in their current roles and continue to work agreed hours unless otherwise advised, the First Union said.

The company has around 650 staff, according to its website.

(5) Shareholders' pain

Postie Plus has been a very poor performer for investors.

Its shares floated for $1.25 a piece in September 2003 and never rose above the listing price, according to Bloomberg data.

The retailer's share price had slumped to 7.3c by Thursday (when the stock went into a trading hold), giving the retailer a market capitalisation of just $2.9 million.

Trading in its shares has now been suspended.

Postie Plus was founded by the Dellaca family and can trace its origins back to 1909, when Thomas Dellaca founded a boot repair shop near Westport.

Kathmandu founder Jan Cameron owns around 20 per cent of Postie Plus.