Fashion retailer Cue has been pushed into a $64.85 million debt hole following a sharp increase in operating expenses and leadership turmoil, according to a recent creditors report. The company’s financial struggles emerged after its acquisition by private equity firm Hilco Capital in April 2025, despite maintaining healthy sales during this period.
Cue’s revenue grew by $5.84 million over two years, reaching $110.53 million in the fiscal year 2026. The company also recorded a gross profit of $66.13 million, reflecting profit margins close to 60 percent. However, operating expenses rose sharply by $11.3 million within 12 months, resulting in a $20.58 million net loss that eroded these gains.
Significant cost increases included a $4.6 million rise in payroll expenses, bringing total wages to $34.5 million, and a $2.2 million jump in marketing costs, which climbed to $5.5 million as additional funds were allocated to photo shoots, digital advertising, and department store allowances. Rent and occupancy expenses increased by $1.9 million to $15.1 million, while finance fees rose $1.4 million to $3.5 million, primarily to service debt facilities owed to Hilco Capital, which is also the largest lender to department store chain David Jones.
Experts point to issues beyond sales as reasons for Cue’s troubles. Queensland University of Technology marketing professor Gary Mortimer noted that many retail businesses struggle due to uncontrolled or rising costs that erode profitability.
The report also highlighted instability in Cue’s leadership following the departure of founding family members Rodney and Melanie Levis in April 2025. Since then, the company has seen three directors and several chief executives in a short span. Sunnymead Advisory partner Michael Calder served as sole director for less than four months before resigning. He was replaced by Eric Morris, former CEO of The Pas Group, who held the position for 10 months. Current director Jon Howarth assumed leadership in May 2026 and implemented a safe harbour restructuring plan aimed at protecting directors from personal liability amid efforts to rescue the business.
The chief executive role saw similar turnover, with Melanie Remai joining from Country Road Group in August 2025 only to resign in May 2026; she will formally exit next month. Chief Financial Officer Josephine Barbaro also left in September.
Administrators from BDO identified July 2026 as the date Cue became insolvent, marked by a sharp rise in unpaid trade bills. However, some legal experts suggest the company might have been insolvent as early as June 2025. The administrators also uncovered a payment of $925,000 to an unnamed creditor within six months before receivers were appointed, a transaction that could be challenged as an unfair preference.
The total claims against Cue and its New Zealand subsidiaries amount to $64.85 million across 704 creditors. An ongoing investigation by the Australian Taxation Office has uncovered unpaid taxes, with Cue having received eight warning letters from May to November 2025.
Despite these challenges, Cue remains an attractive acquisition target. Founded in 1968, the brand once operated 230 stores and generated $180 million annually at its commercial peak. Interest from prospective buyers, including Larry Kestelman’s Brand Collective and founder’s son Justin Levis, has sparked a bidding contest. Final due diligence is underway, with binding offers expected by the end of October.
To improve its appeal to potential buyers, receivers have begun closing 26 underperforming stores, while maintaining the company’s major department store concessions.