Private equity has a lot of questions to answer (if the various groups can ever be bothered) about why their business model is supposed to be so good, especially for retail.
It obviously is deficient, with the Borders/Angus Robertson group owned by Pacific Equity and its investors and the Colorado chain (owned by Affinity Equity Partners of Hong Kong), both going bust this year under the weight of huge debts, which is a signature of private equity deals.
A sluggish retail environment has found out the private equity business model which involves piling a lot of debt on inadequate assets and trying to gear up to the hilt.
It just won’t work when the assets are weak or the sector is under pressure, as bookselling and clothing and footwear are.
A day after Archer Capital boasted it had paid $450 million for the Red Rooster and Oporto fast food chains from Quadrant Capital, which had paid a reported $240 million for a controlling interest in both, more than 1000 employees of crippled retailer Colorado were told they would lose their jobs after 140 "underperforming" stores are closed.
The job losses come a week or so after Ferrier Hodgson said that attempts to keep the Borders chain of bookstores afloat had failed. That will cost more than 1,000 jobs all up when the final Borders outlet is closed, along with those Angus and Robertson shops that have already been shut.
The Colorado cuts, announced by receiver managers Ferrier Hodgson, will slash the size of the chain by almost a third, but means the Colorado brand of shoe and clothing outlets will disappear.
But they leave open the group’s profitable Diana Ferrari, JAG, Mathers and Williams stores.
Ferrier’s have been trying to sell the stores since early April, attracting the interest of Solomon Lew.
In a statement, Ferrier said the job losses were "clearly not desirable" but would eliminate loss-making Colorado-branded stores.
"The remaining brands and stores are all profitable and would form the cornerstone of the future business," he said.
Mr Stewart said no further store closures were anticipated.
Ferrier Hodgson said 27 Victorian stores, employing 200 people, are to close.
New South Wales will bear the brunt of the job losses, with 43 stores employing 319 people to be shut.
In all, 1042 jobs across Australia are to be lost. Of that 666 are casual, 150 permanent part-time, 196 permanent full-time and 30 are full-time head office employees.
The stores will shut in the next six weeks, with the last Colorado-branded store set to close its doors by late July.
The closures of both the Borders and the Colorado outlets will hit mall operators such as Westfield Retail Trust Australia which is the dominant operator in Australasia.
Colorado’s bankers, which were owed $400 million, put the group into receivership under Ferrier Hodgson on March 30 after all economic refinancing options were exhausted.
Securities in Westfield Retail, the most impacted listed stock, rose 2c to $2.64 yesterday, 11c under its 2011 high of $2.75.
