By Lehlohonolo Lehana.
Frame Leisure Trading which operates The Cross Trainer, XKids and XTrends stores is to be liquidated, Business rescue practitioners (BRPs) confirmed.
BRPs George Nell and Gideon Slabbert informed all affected persons on Wednesday that after investigating the company’s affairs and financial situation they concluded there was no reasonable prospect of the company being rescued.
An urgent application for the liquidation of the company was lodged in the High Court in Pretoria on Thursday and is expected to be heard next week.
The company has been in business for 29 years and had 391 employees at the beginning of the year, but this has now declined to 175.
At the onset of the business rescue, the BRPs said the company had 56 operational retail outlets countrywide, the majority in major shopping centres.
However, several landlords have terminated their lease agreements with the company and subsequently evicted it from their premises because Frame Leisure Trading was not in a position to pay any meaningful compensation to the landlords to stop these processes.
Nel said the 56 operational retail outlets at the onset of business rescue have now diminished to just 19.
The BRPs said in the letter to affected persons that their conclusion that the company cannot be rescued is based on legal and financial advice taking into consideration a number of factors.
Frame Leisure Trading CEO Mark Frame said the group’s finances were hurt by the outbreak of the Covid-19 pandemic and its key creditors changing payment terms from 90 days to 60 days or even 30 days.
The financial situation was further exacerbated when key suppliers invalidated previously agreed-upon rebates and opened ‘mono brands’, which directly competed with Frame Leisure Trading,” Frame said.
“Brands also changed their strategy to a direct-to-consumer model, which reduced the amount of product and certain styles to retailers like Frame Leisure Trading.”
“This strategic shift by suppliers eroded the company’s market share and profitability.”
He added that the mass lootings in 2021 had a devastating impact on Frame Leisure Trading, affecting 50 stores and leading to the closure of six.
“The compensation from Sasria was insufficient to cover the losses, and the company received no relief or redemption from landlords, further deepening its financial woes,” he said.
Last week, Drip Footwear made headlines after the Johannesburg High Court ordered the company to be liquidated as it failed to pay R20 million for advertising services.
Cross Trainer and Drip joins a growing list of over 1,000 South African companies that have been liquidated since the start of 2024.
Stats SA’s latest data showed that the total number of liquidations decreased by 9.9% in August 2024 compared with August 2023, declining from 142 to 128 year on year.
Voluntary liquidations decreased by 11 cases to 117, and compulsory liquidations decreased by 3 to 11 during August.
The number of liquidations decreased by 6.8% from 410 to 382 in the three months ended August 2024, compared with the same period in 2023.
Since the start of the year, 1,020 businesses have shut down in 2024.
Although this is a 5.9% decrease from the 1,084 liquidations seen in 2023, it is still a high number. The trendline is, however, declining, even compared to pre-COVID-19.