“We appreciate this decision comes at a difficult time in the retail calendar and the post-COVID-19 recovery path,” the company said.
“However, with our views that operating models and financial structures will need to significantly change in the near term, our concerns are that not all participants will be successful in this regard.”
A QBE spokesperson confirmed it had notified Myer and David Jones of its decision and said it would be open to reviewing the ruling if market conditions improve.
“While we appreciate this is a difficult time for these two retailers, we believe this is a prudent course of action in the current market conditions,” they said.
Other providers of trade credit insurance are also reluctant to extend new cover to suppliers of the two department stores, an industry source told The Age and The Sydney Morning Herald.
QBE’s move indicated the major insurer now believes there is a high risk of both Myer and David Jones not being able to pay invoices for suppliers’ goods and the burden landing on QBE.
The insurer’s decision is a major indictment of the department store chains, which have faced intense scrutiny and questions over their viability during the COVID-19 pandemic.
In a statement, a Myer spokesperson said it disagreed with QBE’s high-risk assessment and said it had continued to pay suppliers throughout the pandemic.
“We obviously don’t subscribe to QBE’s view around the future of department stores. Whilst disappointing, we don’t believe they provided substantial coverage over Myer’s business,” a spokesperson said.
“We will continue to work with our suppliers in delivering suitable commercial terms with or without trade credit insurance sitting in the middle.”
A David Jones spokesperson said the company also disagreed with QBE’s view and also stressed it had continued to pay its suppliers and had worked closely with them throughout the COVID-19 crisis.
“While insurers have adjusted their risk parameters globally in response to COVID-19 this doesn’t change our focus on delivering for suppliers, our customers and our team for the long term,” they said.
QBE is the biggest provider of trade credit insurance in the Australian market, however, it is understood the company represents only 3 per cent to 5 per cent of Myer’s suppliers.
In early June, David Jones announced it would accelerate its plans to close some of its 48 stores and sell about $1 billion in property assets to reduce its sizeable debt pile and cull any unprofitable stores.
Myer has not announced any similar moves but closed all of its 60 locations during the pandemic lockdown whereas David Jones opted to continue trading.
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Dominic Powell writes about the retail industry for the Sydney Morning Herald and The Age.
Elizabeth Knight comments on companies, markets and the economy.