FLIGHT Centre is looking to net to offload its Melbourne headquarters for about $60 million and has tapped investors for $700 million while announcing it would permanently shutter 428 of its Australian retail stores.
The ASX-listed group has also secured a $200 million loan from existing lenders.
The weight of the coronavirus outbreak on the retailing industry was laid further bare yesterday with Swedish fast fashion giant H&M closing all 49 locations down under, leaving as many as 1,300 people out of a job.
Solomon Lew’s Premier Investments closed all of its 900 Australian retail stores for at least one month and declared it would not pay rent on any of its stores during the shutdown.
Myer, Cotton On, Mecca Cosmetica, Witchery, Country Road and Mimco have all stopped in-store trading in recent weeks. Jewellery chain Michael Hill was one of the first retailers to voluntarily shut its store network indefinitely, leaving another 167 shops across Australia inactive.
They add to closures resulting from casualties of the tough retail environment earlier in the year, including Colette by Colette Hayman, Jeanswest, Bardot and 170 year old department store Harris Scarfe.
Longer term, consolidation strategies recently announced by department stores Myer and David Jones and discount department stores Target and Big W would result in approximately 769,200 sqm of retail floorspace becoming available, primarily in regional and sub-regional centres, over the next three to seven years, according to JLL.
For now, landlords and tenants will be waiting on today’s National Cabinet meeting for further word on stipulations regarding commercial tenancy rental relief. Australia’s banks have committed to suspending commercial property loan repayments to distressed landlords, on the proviso they do not evict tenants.
Flight Centre had previously announced it would close 100 stores across Australia, but that has now been extended to 40% of its 944 stores, and 371 of its 573 outside of Australia as it hopes cost control initiatives will reduce annualised operating expenses by about $1.9 billion.
The Brisbane based company is now also planning to divest the 11 level glass building at 436 St Kilda Rd, for which it paid $31.3 million early in 2008 to become its Victorian headquarters, and undertook refurbishments the following year.
The building has 7,524 sqm of lettable area is on 2,317 sqm of land opposite Fawkner Park. Current tenants include Flight Centre’s subsidiary Corporate Traveller, specialist travel agency Stage & Screen Travel, and Football Victoria. One floor is vacant.
Flight Centre’s fully underwritten raising, handled by Macquarie and UBS, comprises a $419 million one-for-1.74, non-renounceable pro-rata entitlement offer, and a $282 million institutional placement.
The offer was priced at $7.20, a 27.3% discount to Flight Centre’s $9.91 last close two weeks ago, and a 16.1% discount to the theoretical ex-rights price. It yesterday requested another extension to its voluntary suspension on the ASX.
Managing director Graham Turner said this is “without question the most challenging period we have encountered in over 30 years”, and that after tracking at record levels through to the end of February 2020, total global transaction value (TTV) fell in March 2020 to 20-30% of normal levels, following increased restrictions of international travel, domestic border controls, self isolation and trading with regard to non essential services.
“Based on these restrictions, further TTV declines are likely in the coming weeks as travel restrictions continue.
“These restrictions are widespread globally and now typically include full bans on international travel, domestic border closures and the forced closures of shops that are not deemed to be providing essential services. Together, they mean that our people are currently processing a fraction of the normal volumes at this time of year and the vast proportion of work previously carried out by our people has stopped.”
The company said it has continued to win and retain corporate accounts and secured contracts with annual spends in the order of $250 million during March, and generate revenues through long term travel bookings, intra-state and intra-region travel, repatriation services, essential services, government work, aircraft charters and alternative revenue streams.
“With this funding in place and additional liquidity, we are in a much stronger position and are well placed to weather a prolonged downturn, which currently seems the likely scenario, and to then take advantage of the significant opportunities that will arise once conditions normalise,” Turner said.