Inside the Invercargill flagship store. Photo / Supplied
What caused the failure of one of New Zealand’s greatest and oldest department store chains, with the loss of 220 jobs? People have questions about what happened, what the future holds and what the loss of this southern institution means.
Invercargill-headquartered H & J Smith this week confirmed it would shut after 123 years of trading, having in May signalled its intention to investigate this drastic step.
The business has explained what happened, what parts will shut, what remains open, how it’s handling gift card redemptions, how it’s dealing with staff, its final trading day, counselling, and more. It formulated 21 key questions, asking and answering each of those, describing how the group started as a department store business in 1900 and expanded through the South Island.
In good times, it grew and developed to incorporate other businesses including two Mitre 10 stores in Invercargill and Queenstown and Laser Electrical in Invercargill.
But now it will close all three stores in November because it says the way we shop has changed.
Q 1: Why have you decided to call time on the department store?
“The H & J Smith Group, with its eye on the future, is taking a proactive step to cease its department store operations. This will allow the community and marketplace to find and create new uses for the current Invercargill site that will better reflect the community of the future.”
“The department store model is in decline here and around the world. Shopping patterns are constantly evolving and changing. Department stores will not be the way people are shopping in the future. Because shopping patterns are evolving, access to an ongoing and sustainable supply chain for our customers is also changing.”
“Despite successful trading for over a century, the H & J Smith Group is making the decision to call time on its Department Stores because it is not a sustainable model for the future. By making this difficult decision now, the H & J Smith Group is ensuring they are in a position to help support and transition its valued employees, as well as give the community the chance to envision a new future for the site.”
Q 2: Why not move to a new location?
“While our current location is seismically challenged, moving to a new store location does not change the increasing challenges of running an independent department store. Shopping patterns and access to an ongoing and sustainable supply chain for customers is changing, making the current business model out of date.”
Q 3: Your store is profitable. Why would you call time on this business?
“While we remain profitable, the nature of the department store model is an overall decline over time and is not sustainable. We believe we have a responsibility and obligation to our staff and community to operate in good faith. We would not be doing that if we continued operating with this knowledge or allowed the business to fail. By looking to the future, and not waiting until the sector grows worse, we are able to responsibly manage our exit and help transition our staff.”
Q 4: What will happen to the Invercargill store location?
“While seismic remediation of the site is needed, nothing beyond that has been decided. We believe the community should have the opportunity to weigh in on this issue and help determine the future of the site.”
Q 5: What will happen to Gun City/School Uniforms/Paper Plus?
“We are currently having discussions with interested parties and will update the community once we have more information at hand.”
Q 6: What will happen to the car park?
“We anticipate the car park will be available per usual. However, as the car park is not owned by the H & J Smith Group, we were unable to definitively say there will be no changes to the arrangement until we had concluded the consultation with our staff and made any decisions. We will now begin having discussions with the owners of the car park. Should changes arise, we will speak to the appropriate stakeholders.”
Q 7: What will happen to the H & J Smith charge card?
“We will stop opening new H & J Smith charge card accounts by July 1. These charge cards will be able to be used at H & J until November 1 and then accepted at Mitre 10 MEGA Invercargill and Mitre 10 MEGA Queenstown and Laser Electrical Invercargill until the end of February 2024.”
Q 8: What will happen to our gift cards?
“Gift cards will still be available for purchase until Father’s Day (September 3). While we encourage everyone to come and use their gift cards as soon as possible, these cards will still be available to redeem at H & J Smith and Mitre 10 MEGA Invercargill and Queenstown.”
Q 9: What will happen to H & J Smith’s Gore and Remarkables Park stores?
“The H & J Smith Group, with its eye on the future, is taking a proactive step to cease its department store operations. This includes the H & J Smith store in Gore and in Queenstown’s Remarkables Park.”
Q 10: Is H & J Smith going out of business?
“No. While the H & J Smith Group continues to be profitable, the future for the department store sector is changing quickly and we believe it is not sustainable into the future. With this factor in mind, we have decided to call time on the H & J Smith department stores and brand.”
Q 11: What does this mean for Mitre 10 MEGA Invercargill and Queenstown and Laser Electrical Invercargill?
“The Mitre 10 MEGA Invercargill and Mitre 10 MEGA Queenstown and Laser Electrical are unaffected and will operate as usual.”
Q 12: Why does the store need seismic remediation?
“H & J Smith Group’s flagship property in Invercargill is seismically challenged, like many other buildings in the city. This is not a reflection of its safety, but how it will perform in the event of an earthquake. It consists of 12 buildings, built at different times, under different building rules and regulations, and each have their own seismic rating. Like many buildings in Invercargill and around New Zealand, it will need to be remediated to bring it to 100 per cent of new building standards.”
Q 13: If you have 23 years to remediate the store, then why are you closing now?
“While we have 23 years to remediate the store to bring it ideally to 100 per cent of new building standard, there are other investments that need to be made, such as internal fittings and décor to bring the shopping experience up to a modern standard. However, it would be financially irresponsible to invest in cosmetic upgrades knowing they would have to be ripped out to perform the seismic remediations at a later stage. It would also be irresponsible to make those extensive investments if the future of the department store industry is in decline. By making this proactive decision now, we are making it possible for the Invercargill site to have a new future within the revitalisation of the precinct.”
Q 14: How much will remediation cost?
“Because of the size of the building, the investment required to remediate the site will be significant. However, any investment assessment will be influenced and determined by how the site will be used in the future through the development of a comprehensive business case.”
Q 15: Did the new shopping centre [in Invercargill] cause the closure of the business?
“The new shopping centre has not played a role in this decision. However, what the new shopping centre has illustrated is that our current store needs refurbishment to be brought up to a modern standard. It’s not advisable to invest in a refurbishment, which will only have to be ripped out during the remediation of the building once these requirements are confirmed. These decisions are part of the reasoning behind this proposal. However, this decision also means the community will be able to envision a new future for the site in keeping with the revitalisation of the CBD.”
Q 16: Your store is full of products - why is getting stock and supply an issue?
“Not only is it important for us to have products to sell, but they must also be what our customers want and have enough of a point of a difference to our competitors. Many of our competitors are now multinationals and chain stores, who buy directly in larger volumes from their suppliers and these products are not accessible to the independent retailers, such as ourselves. Put simply, it is becoming increasingly more difficult to assemble a comprehensive offering of products to support our positioning as a full-range department store with a high level of customer service that our customers expect and deserve.”
Q 17: Are supply issues unique to your department store or the sector?
“No. The sector is under threat worldwide. We have seen many well-known store brands affected. However, independent stores, such as ours, are also impacted by these changes as we do not directly source in sufficient volumes from factories overseas.
“New Zealand only has three independent department store brands remaining – H & J Smith, Ballantynes and Smith & Caughey’s. However, H & J Smith operates from a much smaller region than either Ballantynes or Smith & Caughey’s. They have a trading catchment of more than 1 million to call upon versus our 80,000 people.”
Q 18: What will happen to your staff?
“We are working through this with our staff. We understand this is difficult news and are committed to supporting them throughout this entire process. We will also be offering:
Q 19: What assistance or redundancy programmes will you be offering staff?
“All our employees have contractual provisions in their employment agreements that provide for a paid work notice period of four weeks and redundancy compensation. This is based on a formula based on completed years of service, or, in some cases, is a fixed payment.
“For those employees who have not yet met the qualifying period for this entitlement, we propose the redundancy compensation programme be extended to them as well, with no employee receiving less than four weeks of ordinary pay in redundancy compensation.
“We are also investigating if some of the affected staff members can potentially be redeployed throughout the wider H & J Smith Group.”
Q 20: How will you make sure staff will stay through the end of trading?
“We will be working that out with our staff on an individual basis.”
Q 21: When will trading cease?
“We have proposed discontinuing online sales and Laybys on July 1, 2023, and the last day for trading is Saturday, November 18, 2023. However, some categories and potentially branch stores may have to cease trading earlier due to loss of capability or capacity.
“Throughout its long history, H & J significantly contributed to Invercargill’s retail economy. It has driven visitor numbers, stimulated spending, and offered essential community services such as NZ Post, school uniforms, and more. Located in the heart of the city’s prime retail precinct, the H & J Smith flagship store of over 12,000sq m is one of the city’s major retail anchors, open seven days a week, currently employing 220 people. It has operated from this location for the last 100 years.”
* Anne Gibson has been the Herald’s property editor for 23 years, having won many awards, written books and covered property extensively here and overseas.
Other large healthcare hubs near the site include Southern Cross and Auckland Eye.