Italian OVS clothier failed for the second time in Switzerland (updated May 4, 2019)

By Virginia F. Bodmer-Altura

Fashion retailing in Switzerland is engaged in a fierce battle and marked by significant changes of ownership or even closures.

OVS Oviesse failed for the second time, made a cheap acquisition but pays now a dear price for not turning the chain around

Only two years ago, the Italian OVS clothier – the brand is the foremost of Italy – took over Charles Vögele, a formerly well established chain with outlets in Switzerland, Germany, Austria, Slovenia and Hungary.  Charles Vögele had an excellent reputation particularly for quality at reasonable prices, tried fashion concepts to gain also younger customers, however different managers and fashion styles failed and the group came into financial difficulties and the formerly public shareholders lost their money.

OVS (Oviesse) the Italian clothier started to enter the lucrative Swiss market before and failed. No it is the second time the fashion line and brand has to give up in Switzerland. On May 30, 2018 the Swiss distribution company had to deposit its books, because of financial trouble resulting that the 140 newly trimmed OVS stores showed proceeds 40 – 60 % below the ones of Charles Vögele!

OVS structure in Switzerland consists of OVS Italy, external investors grouped in Sempione Fashion (formerly Sempione Retail) were the buyers of Charles Vögele, and it became the largest fashion chain in Switzerland at a cheap price, but with an non-familiar brand name. OVS had in mind to increase its sourcing volume with the additional outlets and to get higher volumes, thus cheaper prices from contractors.

OVS is attracting younger customers, but the younger fashion did not attract too many newcomers, but scared away the former Charles Vögele customers between the age bracket of 35 years upwards.

In Switzerland the structure of former Charles Vögele was drastically reduced to a sole distribution company, thus design, product development and other competences were now located in Italy and the Swiss staff in these functions had to leave. This resulted in extensive cost reductions.

In April 2018 at the presentation of the annual figures OVS CEO Stefano Beraldo announced the full depreciation of their participation in Sempione Retail and open bills. He was also reporting financial bottlenecks. He admitted that new customers were attracted, but could not outnumber the lost ones of Charles Vögele.

Sempione Fashion employs around 5000 people in the five countries mentioned above, and no one knows what their future might be. The protection under the existing law will lead to the fact that under a moratorium a total bankruptcy and the quick end of the stores can be postponed. It is suggested that within four months the stores will liquidate the collections (a gremium to be nominated by the court) will try to find buyers for the stores of the former chain in Switzerland and in the four other countries. However, in the actual fashion retailing this will be also a risky undertaking.

In addition, the political and economic situation in Italy, including the development in the financial markets, led to the fact that OVS itself is in financial difficulties. In any case, the two times’ failings in Switzerland created high financial losses to OVS, a dear price that is hurting Oviesse.

On June 3, 2018 the news spread that the Italian representatives on the board of  Sempione Fashion, among OVS CEO Beraldo have turned their back to the Swiss company and left the Board of Directors, however he can be legally touched for acts performing before and leading to the desolate situation. This will be – among other duties – the job of the named Executor who is now responsible for all transactions in the process of the legal procedures. The largest post the realties have not been subject to the deal and Swiss millidardaire Hansjörg Wyss bought these from Charles Vögele for CHF 170 million, meaning prior to the takeover by OVS. Sempione Fashion tehrefore has as only assests rental agreements for stores and the remaining cloth lines estimated in a value oif CHF 15 to 20 million, according NZZ Neue Zürcher Zeitung on Sunday.

Stefano Beraldo declared at the annual meeting of CVS in Italy that the company will not assume additional liabilities in Switzerland and therefore there will be probably no offer submitted for certain sales points of Sempione Fashion in Switzerland.

Aspen Trust, the third lagest Sempione shareholder (20.5 %) was not willing to comment what actions they will take. The comment made was that they will analyse the situatio. OVS hold a shareholding quote of 35 %.

Also the actual situation at OVS in Italy is not rosy, because the revenue dropped from EUR 78 to EUR 5 million and the stock exchange share value is dropping further. OVS hat a turnover in Switzerland in 2016 of CHF 264 million (including goods produced under Charles Vögle), in 2015 Vögele hat proceeds of CHF 318 million. In 2017 the turnover of OVS in Switzerland was CHF 233 million.  The density of the chain of stores in Switzerland was much higher than the one of OVS in Italy.

NZZ comments that for many store locations it will be difficult to find new tenants, particularly of the difficult retail situation. Supermarket chain Migros owns 30 of the buildings containing OVS shops.

According to OVS the second Swiss adventure costs are around EUR 60 million.

Since June 27 it became clear that all employees (around 1200) will get the pink slip to quit at the end of June. Only for three stores – so far – tenants could be found. Swiss retailers and department stores are facing also a difficult time but qualified sales personnel is sought for but of course also new offered jobs can no longer be considered for lifetime. The employees of OVS will have to fight for their salary payments in the juridical procedure, however some sort of social contract could be worked out, but its fulfilment depends on the outcome of finding new tenants at the closing stores (June 30, 2018). Since the rebate up to 70 % led to a sale of most of the merchandise on stock. The employees also complained that the management teams have been leaving the sinking boat without assuming their responsibilities, meaning that social partners practically had no adressees to place questions or complaints. The hectic to close down shows that the entire OVS business in Switzerland went out of hand and cash. The end of the story is not yet in sight.

Another problem presents itself now for the management of the shopping centres where OVS was a tennant, mostly this was the case for the two largest Swiss supermarket chains Migros (13) and Coop (11). Since the surface of the former OVS stores are considered large, it will be difficult to find within a short time equivalent exchange. This means also income losses for the two chains. Migros has been also a shareholder of Charles Vögele and has had to make depreciations on the investment. The moving in by OVS relieved at least Migros from doing the same on the localities, but now the losses are shining up.

Sempione Fashion is definitely bankrupt

The process of a sort of Chapter 11 did not work. Thus after the lay off of close to 1200 person in Switzerland, now also the ones in Austria and Slovenia are without a job, totally over 1000 in the two countries. On Friday, August 3, 2018 the definite bankruptcy has been officially declared for Sempione Fashion, including the assets of the foreign stores, however additional bankruptcy actions will be taken care of individually in each nation. This puts a definite end to the traditiional chain of Charles Vögele’s presence in all countries. What will happen to the successor company of Oviesse is not yet clear. The Italian company OVS has put itself into difficulties the second time and a large financial gap will remain on their books.

The newest updating reveals that the Austrian Charles Vögele subsidiary that was not included in the OVS package had to deposit its books for bankeruptcy reasons on May 3, 2019. Teh originally 100 sales points and 700 employees were taken over by the German financial adviser GA Europe. The actual reason for bankeruptcy of the Austrian part was that the beneficial investor demanded more financial means to cover the cost of actual clothing lines for the sales points in Austria to offer actual fashin lines. Unfortunately the negociations failed and the short and longer good’s supply for the remaining sales points became obsolete. The obligations of Charles Vögele in Austria are estimated at EUR 6 million against active assests of EUR 3.4 million.