Case study: fashion retailer ed hardy collapse into administration

Street wear retailer Ed Hardy, the brand once worn by celebrities including Madonna, Jeff Fenech and Melbourne underworld figure Mick Gatto, has been placed in the hands of administrators, less than nine months after the company was named as the sixth fastest growing company in BRW magazine’s Fast 100 list.

According to BRW, Ed Hardy posted revenue of $18.59 million in 2008-09, after posting average annual growth of 168.64% in the preceding three financial years.

But as the hype surrounding the brand has faded, so too has the company’s fortunes.

In late June, stores located in Westfield shopping centres were closed after falling behind on rent, and yesterday the directors of the Australian operation, led by owner and managing director Gary Berman, called in administrators Simon Wallace-Smith and Tim Norman of Deloitte.

The pair immediately closed four stores – Paddington in Sydney, Pacific Fair on the Gold Coast, in Brisbane’s CBD and in Adelaide – and has left six others open while they start to comb Ed Hardy’s books and discover what went wrong.

In a short statement released yesterday, administrator Simon Wallace-Smith said the collapse had been caused by “slowing sales and the competitive nature of the retail industry”.

“The aim of the voluntary administrators will be to evaluate the financial position of the companies and to investigate options to restructure the business,” he said.

The future of the company’s 66 employees remains unclear, and Deloitte has told customers holding gift vouchers or deposits that they cannot be redeemed at this stage.

Ed Hardy’s situation is a far cry from its position in 2009, when the company had 14 stores and Berman was expecting to reach 35 outlets by December 2010 by opening in the Philippines, Indonesia and Vietnam.

The Ed Hardy brand, which is based on the designs of American tattoo artist Don Ed Hardy, is the brainchild of Italian designer Christian Audigier.

Gary Berman acquired the rights to sell Ed Hardy products in Australia, Britain and parts of Asia in 2006, after his children introduced him to the brand on a family holiday to South Africa.

Relate the issue addressed in the case study to ethics. What ethical issues has arisen?