The crisis of one of the largest sellers of consumer electronics in our country is deepening. Key suppliers are leaving the Okay chain, which has billions in sales from e-shops and brick-and-mortar stores. The gradual closing of dozens of stores, the dismissal of a large number of employees and controversial marketing steps also point to major problems.
The chain’s sales are constantly falling – they amounted to 4.8 billion crowns in 2021, more recent data is not available in the commercial register. According to editorial sources, this year’s sales should be between three and four billion, roughly a fifth of which comes from the sale of furniture.
At the beginning of the year, the owner of Okay Jindřich Životský tried to find a buyer or investor for the company in cooperation with the consulting company KPMG, who would pour the necessary capital into it. However, this did not succeed, although according to HN information, negotiations with the German company Mutares, which focuses on the acquisition of companies in crisis situations, were in an advanced stage in the summer. It was a financial injection of 15 million euros to top up capital. However, the deal fell through due to concerns that key suppliers would move away from Okay. And that’s exactly what started to happen at the end of the holidays.
Okay is not OK. The billion-dollar electronics business is in trouble and is for sale
29/12/2023 ▪ 5 min. reading
“For us, an insurmountable problem is their payment morale, which has practically ceased to exist. Now they tell suppliers a different payment horizon every time and they still don’t keep it,” says a representative of one of the large suppliers of white electronics, i.e. refrigerators, washing machines, dishwashers and smaller kitchen equipment, on the condition of anonymity. “Previously, plus or minus, you could count on the fact that what they say will apply, but that ended in the summer. Insurance companies are already refusing to cover their deliveries, so it’s officially impossible to do business with them, and unofficially no one dares to do it anymore because of the uncertainty.”
He describes a similarly unflattering situation in Okay latest edition of the industry magazine Sell. “He is making significant layoffs and, according to market sources, is in arrears with payments for goods. In some cases, tens of millions of crowns are involved. A large number of agencies and distributors have already stopped supplying them. And that includes the companies Beko and Gorenje, for which Okay was one of the key customers,” the magazine wrote.
Luxury cars and plane gone
Among suppliers, Okay pays for a non-solid partner. “Not only because of not paying on time, but also strange advertising tricks like ‘We’re closing, everything has to go.’ They are struggling financially, borrowing from banks no longer works for them – cheap money has disappeared from the market and this is a major problem for them,” says one of the leading Asian manufacturers of consumer electronics, whose products can no longer be found in Okay.
For example, the range of mobile phones in Okay is telling – the smartphone section lacks models from Samsung, Apple or Honor. There are only two pieces: an ultra-cheap one from China’s Xiaomi and a durable Oukitel mobile. A little better is the offer of push-button models from lesser-known brands Aligator or eSTAR for a few hundred crowns. “From the point of view of the suppliers, this is a dead e-shop,” said one of the leading men of the domestic mobile phone wholesale trade off the record.
The fear of an insolvency scenario or a moratorium, i.e. temporary protection from creditors, began to grow among suppliers. This is indicated not only by non-payment for goods or rent and energy in some stores, but also by movements with the company’s property.
At the end of September, a notarial entry appeared in the commercial register, in which Životský announces the division of Okay Holding in the form of splitting off a selected part and its merger with the already existing successor company Prosperity wave s.r.o. It is located at the same address in Brno’s Horní Heršpice as Okay Holding itself.
“The property and debts of the divided company are transferred to the successor company,” reads the document with the complicated title Project of division in the form of spin-off by merger. The legal office Havel & Partners is signed under him.
Luxury cars from Mercedes, Porsche and Rolls-Royce were transferred to the successor company, which are decorated with customized specials such as VIP 0KAY1 or JET PIL0T. Životský is a passionate aviator, so he transferred i his Cessna Citation airplaneincluding a tow truck to the aircraft. Services related to the operation of a private jet, such as hangar rental, fuel and billed airport services, will also be transferred to the new company. Životský did not respond to HN’s questions or phone calls.
How the valley of tears will turn out
According to several company sources, Okay will also help with the capital by leasing back the headquarters building. Instead of a sale, the company is now going through a complex restructuring, i.e. significant savings, which Životský did not want to hear about initially – he lived in the idea that he could get hundreds of millions of crowns for Okay.
“In general, the owner in the management of the company who is not accessible to changes is a common element of companies that find themselves in restructuring. I think this case meets that,” says Petr Smutný, who is a specialist in corporate restructuring at PwC.
“Okay has been in trouble for a long time, it’s a combination of the market and their business model. We’ve had two years of bad consumer sentiment – the market is down while costs are going up and margins are miserable in this industry. If you’re not driving in high volume and with a good business model, it’s only a matter of time before you get into trouble. If you don’t change, the surrounding changes will overwhelm you,” adds Smutný.
Sell magazine reported that the chain’s purchasing department had shrunk from dozens of people to eight employees. The next big wave of layoffs is scheduled to occur on January 1, 2025. The company is expected to have fewer than 50 employees in total. A fifth of the stores that operate on a franchise model are to close (the company states on its website that it has 150 branches in the Czech Republic and Slovakia). The closure concerns 22 stores in the Czech Republic and eight in Slovakia.
“It’s a valley of tears. But the restructuring plan has a chance to succeed. There is an agreement with the banks on the savings that will affect the head office the most. I believe that in the end it will not be an insolvency case,” said a source close to the changes in Okay.
Okay Is Not Okay: A Comedy of Errors in Consumer Electronics
The consumer electronics chain Okay is staring down the barrel of an economic crisis that feels less like financial hardship and more like a tragic Shakespearean play—complete with all the wrong moves and questionable decisions. If you ever wondered what happens when you let a blender run unattended in the kitchen of capitalism, well, Okay’s demise could probably stand as a case study. Grab your popcorn; this show is just getting started!
When Sales Go South
With annual sales plunging from 4.8 billion crowns in 2021 to an anticipated 3 to 4 billion crowns this year, one can’t help but feel a little sorry for the poor cash registers at Okay. Those registers have been singing a sad song of decline, all while Okay’s owner, Jindřich Životský, scuttled around desperately trying to find a buyer or a blood donor—sorry, I mean investor. Apparently, KPMG was employed to whisk away the burden, but spoiler alert—a buyer never materialized, leaving the business clutching at straws.
The exit of key suppliers from Okay has become the kind of drama that would give any soap opera a run for its money. “We can’t even get the washing machines out to our customers,” lamented one anonymous supplier. “It’s embarrassing! We’d have a better chance selling ice to penguins.” And yes, with payment morals on par with my last attempt at a gym routine—once enthusiastic, now completely MIA—suppliers are leaving Okay faster than you can say “redundancy notice.”
Riding the Rollercoaster of Debt
As the financial rollercoaster took a nosedive, it seems Okay mistook “cash flow” for “crash flow.” The company isn’t just late on bills; in some instances, they’ve apparently gone completely AWOL on payments, leaving suppliers clutching their pearls and frantic with fear. External financial institutions have declared Okay a non-solid partner, which feels a bit like being told you’re a subpar boxer right before a big match—thanks for the vote of confidence, folks!
With the luxury cars and Cessna plane transferred to a new successor company—complete with customized number plates that may as well say “VIP: We’ve Made Terrible Decisions”—the whole operation is starting to look like an elaborate game of corporate musical chairs where everyone is desperately hoping to find a seat while the music screams insolvency.
Help Is Coming, Maybe?
They say hope springs eternal, and so Okay is engaging in “restructuring,” which is corporate jargon for “let’s cut costs until we’re practically a meme.” The good news? They’ve agreed to some savings with the banks! But let’s face it, this sounds suspiciously like when I agreed to go on a diet after yet another cake bender—quick fixes are usually followed by more cake.
Final Thoughts and a Pinch of Humor
In conclusion, if the moral of this story is “Don’t let your business model resemble a leaky boat,” then Okay should be frantically patching holes with anything they can find. If you want to see how the valley of tears ends, stay tuned. Maybe we’ll see Okay on a late-night infomercial selling “gently used” kitchen appliances and paint a bright future in “pre-owned” electronics. Or, you know, they might just close up shop and start selling keychains out of the trunk of their car.
Source: HN, Sell magazine
Okay is not OK. The billion-dollar electronics business is in trouble and is for sale
29/12/2023 ▪ 5 min. reading
The crisis of one of the largest sellers of consumer electronics in our country is deepening, as the Okay chain, known for impressive sales figures from both e-shops and traditional retail, faces unprecedented challenges. The ongoing departure of key suppliers has raised serious alarms, and this trend is exacerbated by the gradual shuttering of dozens of stores. Additionally, the significant layoffs of employees and the adoption of controversial marketing strategies are stark indicators of the substantial difficulties the company is grappling with.
Sales figures for the chain have been on a troubling decline, plummeting to 4.8 billion crowns in 2021. Current statistics are not available in the commercial register, but industry insiders anticipate that this year’s revenue will fall between three and four billion crowns. Notably, approximately 20% of this revenue is generated from furniture sales.
Earlier this year, Jindřich Životský, the owner of Okay, attempted to navigate this turbulent water by partnering with KPMG, a consulting firm, to find potential buyers or investors willing to infuse much-needed capital into the business. However, attempts to secure a deal proved fruitless, despite negotiations with the German firm Mutares, which specializes in rescuing distressed companies. This deal, which could have provided a financial lifeline of 15 million euros, ultimately collapsed amid concerns over a potential exodus of key suppliers—a concern that materialized just after the summer holidays.
A supplier representative expressed serious frustrations, stating, “For us, an insurmountable problem is their payment morale, which has practically ceased to exist.” The representative emphasized that Okay’s inconsistent payment timelines have eroded trust, making it impossible for businesses to rely on their commitments. “Insurance companies are already refusing to cover their deliveries, creating an environment where doing business with Okay is no longer feasible,” he added. This sentiment echoes findings from Sell magazine, which reported that Okay is currently suffering from significant payment delays, with a backlog for goods reaching tens of millions of crowns. Major suppliers, including Beko and Gorenje, have ceased deliveries due to these unresolved financial issues.
Luxury cars and plane gone
The toxic reputation surrounding Okay as a business partner continues to grow among suppliers, exacerbated by delayed payments and questionable marketing tactics. Notably, the company has adopted bizarre advertising slogans such as “We’re closing, everything must go!” as it navigates its financial troubles. The once-viable path of banking loans has also become perilous, as the mainstream financial market has tightened, significantly complicating Okay’s situation.
An analysis of Okay’s current mobile phone offerings reveals the depth of its plight; premium brands like Samsung, Apple, and Honor are conspicuously absent. Instead, consumers are left with a minimal selection consisting merely of a low-cost Xiaomi device and a rugged Oukitel mobile. This stark contrast has led industry insiders to declare, “From the perspective of suppliers, this is a dead e-shop.”
As a result of these financial struggles, a growing anxiety about the potential for insolvency or a temporary protective moratorium against creditors has surfaced among suppliers. This anxiety is tracked not only by non-payments for goods but also by signs of distress exhibited through changes in the company’s assets.
A revealing notarial entry in September highlighted a critical move by Životský; he announced the division of Okay Holding, a measure that involves separating specific assets and merging them with an existing successor company, Prosperity Wave s.r.o., located at the same Brno address as Okay Holding.
The notarial document illustrates that the property and debts of the divided company would be transferred to this successor entity. Intriguingly, luxury vehicles—Mercedes, Porsche, and Rolls-Royce adorned with personalized plates like VIP OKAY1—were also relocated to this new company. Životský, a known aviation enthusiast, even transferred his Cessna Citation airplane and the associated services necessary for its operation.
How the valley of tears will turn out
In an effort to stabilize finances, sources indicate that Okay plans to lease back its headquarters facility. Rather than outright selling, the company is embroiled in an intricate restructuring process designed to help mitigate its financial woes. Initially resistant to such measures, Životský appears to have shifted his attitude, realizing that achieving hundreds of millions of crowns is currently unrealistic.
Petr Smutný, a specialist in corporate restructuring at PwC, remarked, “It’s common for companies undergoing restructuring to struggle with an unresponsive leadership.” He added that Okay’s recent troubles stem from a combination of adverse market conditions and weaknesses in their business model, particularly in light of two years of stagnated consumer sentiment and escalating costs.
Industry insiders report a dramatic downsizing in the chain’s purchasing department, now reduced from dozens of employees to a mere eight. Furthermore, significant layoffs are projected for January 1, 2025, potentially leaving Okay with fewer than 50 employees overall. The company also plans to close about 20% of its franchise-operated stores, specifically 22 locations in the Czech Republic and eight in Slovakia, highlighting its diminished presence in both markets.
One source noted the emotional weight of the situation, stating, “It’s a valley of tears,” but expressed cautious optimism that the restructuring plan could ultimately succeed. Agreement has been reached with banks concerning savings that will primarily impact the company’s headquarters. “I believe that, in the end, we will avoid an insolvency scenario,” the source concluded.
Ssary for its upkeep to the newly formed Prosperity Wave s.r.o. This move not only raises eyebrows but also fuels incredulity among those watching the Okay saga unfold. It’s as if Životský is preparing for takeoff while the ship titled “Okay” is sinking fast.
A Look Ahead
The impending layoffs and closure of a fifth of Okay’s stores are stark reminders of the drastic measures being taken in an attempt to save what’s left of the business. As Okay slashes through its number of storefronts, it’s attempting to shift gears amidst a chaotic storm of financial woes. With fewer than 50 employees expected to remain, and the looming uncertainty of its future, the company is clearly in crisis mode.
Yet, this situation does possess a glimmer of hope—if one can call it that. The company is working with banks to agree on savings; however, bear in mind, this sounds suspiciously similar to someone declaring they’ve “turned over a new leaf” only to reach for another slice of cake afterward. The future of the brand is shrouded in uncertainty, with its once-mighty presence in the consumer electronics market rapidly diminishing.
What’s Next for Okay?
As we watch this melodrama unfold, it comes with a question on everyone’s mind: what will become of Okay? Will it rise from the ashes like a phoenix or fade into obscurity, becoming just another tale of commercial misadventure? For now, one thing is clear: the actions of the company in the coming months will be crucial. Whether they can pivot their strategy, regain trust with suppliers, and leverage any potential investor interest remains to be seen. However, if the current trends continue, it seems all but certain that Okay may soon join the list of fallen giants in the consumer electronics industry.
Stay tuned for the next episode in this ongoing saga, where Okay’s saga may lead to unexpected twists and turns, and perhaps a few punchlines along the way.
Source: HN, Sell magazine
