Colorado Group reborn as Fusion Retail – here are five key challenges for the brand

Thousands of jobs have been saved by the restructure and rebranding of the former Colorado Group, but the newly formed Fusion Retail Brands has its work cut out for it to make a splash in this difficult retail environment, retail experts say.

Six months after Colorado Group went into receivership, owing $400 million to a syndicated of 18 lenders and another $27 million to unsecured lenders, it’s been revealed that its lenders National Australia Bank, Japanese bank Nomura and Anchorage Capital Partners and ICE Canyon have taken on the business – with some minor changes.

Under the new model, there will be 282 Jag and Diana Ferrari clothing stores, and Mathers and Williams shoes stores – a dramatic reduction from its private-equity days where there were 441 stores.

SmartCompany spoke to retail expert David Gordon, WHK principal, about what Fusion will need to get right to prosper.

Branding and products

Gordon says Colorado still has a fairly good brand, despite the receivership, and it’s important that Fusion is able to not only bring in those old customers, but attract some new ones. At the time of the collapse, however, it was noted that the group was positioned above department stores but below high-end fashion chains, which was a difficult position to occupy when niche or mass market seemed to be preferred.

“The key there is to ensure that they’ve got the right ‘product people’ because the right product will dictate whether they’ll be a success or not,” Gordon says.

Management

Three management changes in four years didn’t help the company before its collapse, so industry-watchers will be keeping any eye out on whether the good talent was retained and new talent has been acquired by the new management.

Gordon adds that the new management, led by Kevin Roberts, who spent just months with Colorado before its collapse and formerly worked at adidas, is a relatively unknown proposition. Retaining the managers of Jag and Diana Ferrari, the better performing businesses, would be a coup, he says.

Strategy

While Fusion won’t be encumbered by the massive debt load of Colorado’s – it is now just $90 million, 75% lower than before – getting the strategy right is the next step.

“Just because they’ve got rid of the debt, doesn’t necessarily mean the same business can run the business well,” Gordon says.

Getting the board right

The composition and decisions of the board will be key, according to Gordon. “We would hope to see the board input and the board having a more effective role because one of the issues with the previous mob was the board was part of the problem,” he says. “The board really needs to be constructed and supported, but also have the relevant amount of experience and industry knowledge.”

Retail conditions

The new owners clearly feel they can turn the business around, flagging $40 million in capital expenditure and more than $30 million on marketing for both online and instore sales.

“We have seen this business go from the brink of collapse to emerge from receivership financially stable, with a secure balance sheet and a bright future,” Roberts has said.

Fusion is tipping earnings before interest, tax, depreciation and amortisation of $23.4 million this financial year, on $275.7 million in sales. But as many retailers will tell you, it’s a tough market out there and every dollar is hard won.