Furniture chain Fantastic Holdings has announced as part of an eight-month structural review that it may sell the Dare Gallery chain, which it rescued out of administration three years ago, saying the company needs to focus more on brands that can be “vertically integrated”.
The announcement comes alongside another key move in the furniture business, with Harvey Norman setting up its own chain in Singapore.
The Dare Gallery announcement comes during a troubling time for both the furniture and retail markets, with Fantastic announcing in August that it had seen like-for-like sales fall by 1% during the previous 12 months.
Fantastic was contacted this morning, but a spokesperson was not available prior to publication.
In a statement posted yesterday, Fantastic said that after the Dare Gallery was rescued out of administration in 2008, the company was already managing a number of brands inside its portfolio and that this acquisition presented “further organisational and strategic complexity”.
Since then the company has been able to increase its size and diversity, but has realised that this strategy is counter-productive. A review was called earlier this year to address this and other issues.
As a result, the manufacturing division is now reporting to the retail and supply chief, which it explains enables the company to better integrate its operating divisions. It will also scale back the Holdings Company structure, putting resources back into divisions including product buying, advertising and division finance.
“While on the surface this may appear counter intuitive to the Group’s ongoing cost reduction aims, the reality is that much duplication has now been removed and net savings have resulted.”
And in a major strategy move, Fantastic says the company needs to start focusing more on its vertical integration and those brands that can deliver it.
“Dare Gallery does not fit into this category,” it said, “due to constant turnover of product and “on-trend” fashion positioning. In furniture retailing, “daring to be different” can be complex.”
“But with such strong brand awareness and a clearly defined market “niche”, the Group has determined that Dare Gallery certainly does have a continuing future in the Australian furniture market.”
However, Fantastic noted “this does not necessarily mean that FHL will remain in long-term ownership of Dare Gallery”.
Fantastic noted that Le Cornu and Dare were purchased for relatively inexpensive prices, and noted that since July, Dare has been profitable every month, while Le Cornu is expected to turn a profit in the last six months of the year.
The 10-store Dare chain was purchased three years ago, but collapsed after a disappointing sales period.
Meanwhile, Harvey Norman has opened its new multi-million dollar furniture store, Space Furniture, in Singapore. The multiplex, which is 3,700 square metres, will feature a number of pieces from European brands, with chief executive Katie Page saying the high-end property market will keep demand high.
“Singaporeans are very European in taste,” she told the Australian Financial Review. “They love Italian design .We don’t have to take this Space brand anywhere else at this point because they’re all coming to us.”
Harvey Norman has been operating in the region for a decade, but has only just moved into the high-end dedicated furniture market. Page commented the move into furniture also comes at a time when it has become easier for the company to operate in Asia.
“The cost of doing business in Australia is certainly prohibitive,” Page said. “At the moment you can get something shipped in from overseas, not pay GST, not pay compliance, not pay company tax, and that’s a real problem.”
“The Government is losing a lot of tax by not closing that loophole. It’s only fair for there to be a level playing field.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
