Several employees of a collapsed footwear company suspected the retailer was on its last legs for some time as they were accosted by angry creditors and customers on a daily basis, endured pay runs that were weeks late and never received their final entitlements.
Controversial luxury shoe retailer Sneakerboy went into voluntary administration in early July but two former staff members told news.com.au this was not surprising.
Five companies were included in the administration notice, Sneakerboy Pty Ltd and two related companies under the Sneakerboy name, and Luxury Retail Treasury Pty Ltd and Luxury Retail Group Pty Ltd (Sneakerboy’s parent company).
ASIC documents seen by news.com.au show the embattled company and its related companies owe $17.2 million to more than 100 creditors, including $200,000 to Nike.
A whopping $500,000 is also owed to 120 past and current staff members through unpaid wages and entitlements.
Elliot* worked for Sneakerboy since 2017 and is owed $15,000 from 220 hours of annual leave and roughly 12 months of superannuation that he never received after quitting in January this year.
“Since 2018 there were a few warning signs (at Sneakerboy), pay was occasionally a tiny bit late, like a day late,” he recalled to news.com.au.
“Then over the years it started to get out of control, in the last year it would be one to two weeks late. It was insane.”
The Melbourne worker, 34, was struggling to pay rent and groceries from the late payments and now works elsewhere, adding: “You get paid on time (at this new place), it’s crazy, it feels like such a treat.”
Elliot said from the beginning of his stint at the company he had doubts about the way Sneakerboy made money
“I felt like it wasn’t a sustainable business model, it was predicated on taking money from customers and using that as a loan to buy the shoes which is insane,” he said.
Customers would fork out cash for a pair of shoes, which was usually thousands of dollars as Sneakerboy sells sneakers by brands like Balenciaga and Canada Goose for well north of $1000. This money would then be used to actually buy the shoes — but the products would usually arrive weeks or months later as it was a pre-purchase order.
Wait times for sneakers usually blew out to weeks or months, causing angry customers to ring stores multiple times a day requesting for refunds.
Elliot said his store got “a lot of refund calls.”
“You would try to delay it as long as possible,” he added.
Things reached a head when one customer spent between $40,000 to $50,000 on sneakers — with plans to sell it on at a higher price at her home country of China. However, the shoes didn’t arrive for months.
“She put her own lock in front of the store, she put a bike lock on the front door,” Elliot said with a laugh.
“They had to get a locksmith. Some people were mad about it, but she spent tens of thousands of dollars and had n’t received her product from her so it was fair enough”.
It’s understood from creditors there are in excess of 1000 customers who prepaid for products which may now never arrive.
News.com.au has contacted Sneakerboy and its two co-owners for comment.
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Struggling to pay rent
There were times when Elliot couldn’t afford rent because his pay arrived so late and he had to sell some of his own stuff.
“You’d have weeks where it’s like ‘cool, gotta sell a bunch of my own sneakers to pay rent’, it’s pretty cooked,” he said.
Although it looked like superannuation was being deposited into his account according to his pay slip, he knew this wasn’t the case.
“We’d all known for a couple of years our super wasn’t being paid properly, when you got the pay slips it said you were getting super but obviously they weren’t,” he added.
The Fair Work Ombudsman confirmed to news.com.au that it was investigating Sneakerboy over concerns from workers regarding their wages and entitlements.
A spokesperson told news.com.au the government department “has ongoing investigations in relation to Sneakerboy”.
“As these matters are ongoing, it is not appropriate for us to comment further at this time.”
Elliot said he could “tell Sneakerboy was going badly” because it was doing 40 per cent off sales even when they didn’t have stock available.
“It was fully desperate,” he said. “They were struggling for cash flow all the time.”
‘Blocked the exit’
Adam* worked at Sneakerboy’s Sydney store for four years and he claims the run-ins with angry customers and creditors made him develop depression.
“The constant pressure from management to keep selling on my day off and angry creditors have affected me mentally,” he told news.com.au.
“I had to visit a psychologist and psychiatrist to combat my depression.”
The 26-year-old resigned three months before Sneakerboy collapsed and said his mental health has improved since then as he has “moved on to better things”.
He alleges one of the worst interactions he had was with the landlord of his store who had not been paid rent for months.
“They were shouting at me and acting aggressively,” he said. “They blocked the exits, spoke very rudely and kicked me and other staff members out of the shop.”
He also said they got angry calls from contractors, including third party cleaning companies and delivery partners over unpaid bills.
“Customers were the most frequent and the worst,” Adam continued.
“They would abuse the staff members by shouting, swearing, acting aggressively, throwing fits, and threatening the staff member.
“Imagine you are getting this at least seven to nine times a day through phone calls or coming to the store.”
He added: “From my observation, every time Sneakerboy desperately needed money, they always start massive sales by offering high discounts for branded products.
“If you recall, last year, they did four or five massive warehouse sales, which is unusual for a business.”
Stephen Dixon from insolvency firm Hamilton Murphy Advisory was appointed as administrator at the beginning of July.
There are 36 potential buyers circling to try to acquire Sneakerboy, according to Mr Dixon.
“This interest has come from a range of international and Australian parties across a broad industry spectrum,” a statement from the company read.
“We appreciate and understand the concerns that all stakeholders to the Sneakerboy Group have, especially employees and customers,” Mr Dixon said.
“We continue to urgently work towards a sale of the business, as we believe that this will be the best outcome for creditors. Employee obligations are a critical part of the negotiations we are having with potential buyers.”
*Names withheld over privacy concerns
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