• West Pack and its group of companies expanded too quickly and is now unable to pay its debts.
• This is because expansion costs have not been offset by new sales. The company is blaming an “incorrect product mix.”
• West Pack says its prospects to turn its business around are good and is expected to start selling off assets.

Popular South African retailer West Pack has placed itself into business rescue as its expansion plans across the country became unsustainable, leaving it unable to make enough money to pay off its debts as capital expenditure grew beyond profits.

Melrose Arch-based advisory group Matuson Associates published West Pack’s business rescue proceedings in May, West Pack nominated Grant Chittenden, Jenna Osborne, and Lance Schapiro as its business rescue practitioners.

These practitioners will now assume control of the “group” in place of the group’s executives and board.

West Pack says it voluntarily entered business rescue in order to save the jobs of its 924 employees countrywide, across its companies, including brands like West Pack, Petzone, and Café Estreito, among others. It has 52 stores in South Africa, Lesotho, and eSwatini.

The company’s problems were compounded when an unchecked growth and expansion plan of opening new stores as often as it could became unsustainable as costs related to the growth were not being offset by new sales.

A report from the Daily Investor tells that the company has been unable to drive profits at its stores due to an “incorrect product mix,” meaning that the company believes it is not selling the right products that its customers want.

Because of high growth costs, it can now not afford to buy the “right product mix” in order to offset these costs. What happens then is that the company has been trading at a loss and now fears retrenchment of employees and worse, bankruptcy.

West Pack adds that South Africa’s faltering economy, which shrunk by 0.1 percent in the last quarter and complications due to loadshedding made these problems worse. The company, however, believes it has strong prospects of turning its business around.

It now plans to sell non-core assets and improve how it procures new products to fix its product mix. It hopes better products and more stock will allow it to achieve retail sales large enough to pay its many rental agreements and debts.

“By implementing the above initiatives, there will be a reasonable prospect of rescuing the company,” West Pack said.