It has survived two world wars and two severe depressions only to encounter a ‘perfect storm’ in 2024. Auckland’s landmark department store Smith & Caughey’s is set to close after 144 years – chairman Tony Caughey explains why in this exclusive interview with editor at large Shayne Currie.
The floors of Smith & Caughey’s are eerily quiet. On a weekday morning, one assistant is polishing a glass shelf. Another is browsing through their iPhone.
They are dressed immaculately.
The only customers in sight, an older couple, look slightly lost. They appear to be tourists, judging by their backpacks and colourful ensembles.
A stroll through Smith & Caughey’s landmark Queen St store paints a sombre but telling picture of the challenges facing one of Auckland’s most prestigious retailers.
The shelves are packed with high-end luxury items – makeup, handbags, clothing, homeware and accessories. The Queen St store – steeped in rich history and rightly described as the “Grande Dame” of the Auckland retail landscape – feels cavernous on a slow retail morning.
Further down Queen St – past a plethora of security guards standing stern-faced at the entrances of jewellery and luxury retail stores – Tony Caughey sits at a long boardroom table.
He is stoic but sad – one of the last things he wants to be doing is talking to the Herald in these circumstances.
Caughey, the chairman of Smith & Caughey’s, led a meeting on Wednesday morning of about 240 staff, where he outlined the proposal to close the business after 144 years.
“I hoped that this wouldn’t come on my watch,” says Caughey, who has been a director of the business for 30 years and chair for the past 15.
“It’s a sad day for me and an unsettling day for staff.”
He outlines five factors that have led to today’s announcement – each of them possibly survivable on their own but, combined, have led to a “perfect storm”.
The company is now running at a loss, stemming from a 40 per cent decline in revenue over the past five years.
“We’ve traded through depressions before; we could trade through loss of consumer confidence and other things.
“But when you look at all these other factors, it’s all a bit overwhelming.”
Firstly, he says, the establishment and upgrade of new malls, especially over the last five years, have led to more consumer options, while many luxury brands have also opened their own retail outlets. For years, Smith & Caughey’s has been renowned for its cosmetics – for example, its Newmarket store opened the first Mac counter in New Zealand. But now similar experiences are replicated in the Westfield mall, just 200m up the road, at the likes of Farmer’s, David Jones, Sephora, and Mecca.
Secondly, the central Auckland shopping district – especially in and around Queen St – has become what Caughey describes, perhaps kindly, as “unfriendly”. He cites the plethora of orange cones, Auckland Transport’s discouragement of vehicles, and concerns about crime.
Thirdly, while Smith & Caughey’s traded through Covid, the social changes originating from the pandemic – in particular, the number of workers now regularly anchored at home – means there are far fewer people coming into the city.
Fourthly, the cost-of-living crisis and high interest rates have meant disposable income is being spent on the mortgage. Consumer confidence is low.
And fifthly, there has been a well-established international trend of a move away from department stores. The likes of Macy’s and Nordstrom in North America are contracting, and in New Zealand, we lost H&J Smith in Southland last year and Kirkcaldie & Stains in Wellington in 2016.
Caughey says Smith & Caughey’s started considering its own options about two years ago, as it began running losses.
“We had to come up with some sort of gamechanger if we were to make it work. We employed some independent consultants to check our numbers and bring to us any other ideas they had, for what was happening internationally, that we could transport to Auckland.”
He says the consultants came up with about a dozen or so scenarios but “we couldn’t come up with one that provided returns commensurate with the investments required”.
In the end, none of the options would return the business to pre-2019 revenue.
“We’ve got our main store in Queen St, that’s been our main generator.
“That’s been our strength for decades – it’s now a weakness.”
Marianne Smith (nee Caughey) was a remarkable businesswoman.
Having survived a treacherous, 104-day journey by ship to New Zealand from Northern Ireland in 1879, she had established her own drapery and millinery business, Smith’s Cheap Drapery Warehouse, on upper Queen St – on a site opposite the Town Hall – within a year.
According to a potted history of Smith & Caughey’s: “As the store’s name indicates Marianne’s philosophy was ‘Small profits and quick returns’ and ‘A nimble sixpence rather than a slow shilling’.”
According to Te Ara, the Dictionary of New Zealand, “The store specialised in supplying country customers and fostered a Māori clientele by advertising in the Māori-language newspaper Te Korimako.”
Soon after, her husband William Smith would join her in the business, followed – a couple of years later – by her brother Andrew Caughey. Both men had strong experience in drapery, having worked at James Lindsay in Ireland. William also worked in New York, at A.T. Stewart and Co on Fifth Avenue.
The trio’s fledgling New Zealand business – by now known as Smith & Caughey’s Drapers & Clothiers - moved to the existing Queen St building in 1884 and they bought it outright in 1891. There had been concerns they had established themselves on the wrong side of Queen St – the eastern side was considered a better site, given the footpath was bathed in all-day sun.
But its customer focus appeared to give it an edge in a highly competitive and booming retail market. From an early catalogue: “When a Firm can say ‘Our best asset is the memory of our customers’, it has established its business upon a rock. It has created a goodwill which may actually be more valuable than all its tangible properties combined.”
The business started building itself on the back of quality, high-end goods, directly sourced from London and other overseas locations. Marianne, William and Andrew would make regular trips overseas to source stock.
In New Zealand, Andrew would use a packhorse to travel across the wider Auckland region, selling goods to pioneer families.
Browse historic illustrations from Smith & Caughey’s archive below:
Image 1 of 8: Historic illustrations from Smith & Caughey's archive. Picture / Supplied
Marianne and William never had biological children – the lineage of the business’ ownership rests fully on descendants from Andrew Caughey, yet the Smith name has survived all this time.
Today, Smith & Caughey’s is 48 per cent owned by the Marianne Caughey Smith-Preston Trust, with the rest of the shareholding made up of some 60 Caughey family interests.
“My father [William aka Bill] started in the business when he was 19 and stepped down as a director when he was 90 after 71 years,” says Tony Caughey.
“He was chairman in his mid-80s and devoted his life to the business as did his father’s generation and the generation before that.
“So, there is a big issue of family loyalty and history and it’s probably one of the reasons why we tried so hard over the last couple of years to find a way to try and keep the doors open.”
There are now, he says, a wide range of family interests.
“When you get down to five generations from the founder, you get a wide range of interests spread across a lot of different fields.
“In the old days I think decisions used to be made around the family dining table and that was that.
“But we’ve had a lot of Zoom meetings and those sorts of things to try and keep people on the same page.
“The families grow and evolve and I think it becomes increasingly harder to keep a singular sense of purpose when you have that diversity after five generations.”
Today, his thoughts are with his staff, some of whom have been with the company for 30 or 40 years.
He says they will have seen a decline in sales but still, today’s proposal “will come as a shock to them”.
“We’re very keen to look after them as best we can – give them all the support they need through the consultation process and then sort of re-evaluate things at the end of that consultation process.”
Over 144 years, the company has been renowned for looking after its workers.
From financially supporting the staff servicemen who were shipped off to war, to establishing a holiday home at St Heliers before the advent of Tāmaki Drive, it has been a family business in the truest sense of the word.
To give you a sense of Smith & Caughey’s place in the pantheon of New Zealand retailers, its establishment in 1880 came almost 30 years before Farmer’s.
Wellington’s famous landmark department store, Kirkcaldie & Stains, was established in 1861, and survived 153 years before its closure in 2016. The David Jones department store moved into the historic Lambton Quay building later in 2016 but closed itself in 2022.
Briscoe’s roots stretch back to 1861 as well, starting out as a retailer to serve Otago gold miners. Hallensteins began in 1873 when German-born merchant Bendix Hallenstein set up the New Zealand Clothing Factory in Dunedin to supply his stores.
Southland’s landmark retailer H&J Smith closed in late 2023, after 123 years in business.
Ballantynes in Christchurch is New Zealand’s oldest department store, established in 1854. As well as its flagship Christchurch store, it has outlets in Timaru, Invercargill and Auckland.
Overseas, the move away from department stores has become an established trend over the past decade.
Between 2016 and 2021, the UK lost some 83 per cent of its department stores, including British Home Stores (BHS) and Debenhams. Earlier this year, the John Lewis retail chain said it would be cutting some 11,000 jobs.
In North America, Nordstrom has closed 15 of its department stores across Canada and the US including its famous San Francisco store in 2023, while Macy’s announced in February that it would be closing 150 of its 500 locations, including 50 this year.
CNN reported: “As the middle class has shrunk in recent decades, the retail market has split: Lower-end stores focused on cost-savings, such as Walmart, have done particularly well. But so have luxury brands, as shoppers with means have been able to keep up their spending, despite higher prices.”
Across the boardroom table, I run through some potential scenarios with Tony Caughey, such as closing the Queen St store, and retaining Newmarket. He confirmed it was an option that the consultants considered.
“Newmarket is a much smaller store than Queen St and we really didn’t feel that was going to give us the momentum to cover all the expenses of the buyers and the head office functions and all those other things. That would have been a complete contraction that probably wouldn’t have worked.”
What about a string of smaller stores to sustain the business? Again, an option that has been considered, but not one that would cover the fixed costs, he says. “We struggled to try to make those work, but at the end of the day we couldn’t.”
I ask him, then, if the company had ever considered moving into a mall.
“Yes, we did over the years. We were approached early on to go to Sylvia Park and we evaluated that pretty carefully, but we decided – and maybe it’s part of our history – we own our buildings, we’re not really mall people, as it were, and so we elected not to do that.
“And that was sort of fine up until five years ago – when everything changed.”
Caughey has been proud of Smith & Caughey’s online service, which now accounts for around 20-25 per cent of revenue. But, again, it hasn’t been enough to offset the losses.
“Often, we find customers – when they come in to buy something – are as well-informed as the sales staff because they research it all, they know what they want, they do the work before they come into the store.
“But the bulk of retail is still in bricks and mortar. Yes, there certainly is a place for online, but you’d need both to operate going forward.”
Caughey says the company has made its views known about the state of central Auckland through the Heart of the City organisation but it hasn’t spoken directly to local or central Government about its own recent plight.
Caughey says the company has never sought assistance, financially.
“We’ve thought about that and looked at the options, but we just think that what would be needed to keep the thing afloat wouldn’t be fair on taxpayers or ratepayers.
“We do need to have a world-class international city in Auckland [and one] that’s a friendly place to be in the city centre.
“That’s probably the main challenge for local government.”
The company was planning to brief the likes of the Government, Auckland Council, mayor and local business leaders about its proposed closure after the staff meeting this morning.
The names Smith and Caughey are indelibly marked on Auckland, even beyond the Queen St and Newmarket stores.
The company’s founders were frugal and generous, and wonderful philanthropists, says Tony Caughey.
The Marianne Caughey Preston-Smith Rest Home Trust was established after Marianne’s death and upon her instructions in 1938. She wanted her estate to provide care for the “infirm, aged or those suffering hardship” in Auckland.
The trust established the Caughey Preston rest home in Remuera in the 1960s but it closed in 2017 following financial losses. The expansive, 3.1ha Upland Rd site was sold in 2020.
Two decades before her death, in 1916, Marianne gave her and William’s home, The Grange in Herne Bay, to the Salvation Army. It became an orphanage for girls.
“Another orphanage, the Wesley Home in Mt Albert, had been given to the Methodist Church jointly with her brother Andrew in 1913,” says Te Ara.
“In 1929 Marianne also gave two parks to the people of Auckland. The first, named Quinton Park after Quinton Castle in Portaferry, was located on a clifftop on the North Shore.
“The second, [Craigavon Park in Blockhouse Bay] also commemorated her Irish birthplace as it was named after Viscount Craigavon, Prime Minister of Northern Ireland, who visited Auckland in 1929.”
Says Tony Caughey: “These people were smart; they knew what they were doing and they built up quite a legacy.”
In terms of giving back, the company is also famous for its Christmas window displays in the Queen St store.
If the proposal to close Smith & Caughey goes ahead, the stores are likely to close in early 2025, giving families a final opportunity to farewell Santa and a local institution.
“A lot of people come into town for that experience. We put a lot of effort into it.”
Closing in early 2025 would give the company a chance to get through a busier retail period, with much of its summer apparel already ordered.
So – in the event that the proposal does go ahead – what will now happen to the buildings owned by Smith & Caughey’s? They are on prime and lucrative real estate.
Caughey is reluctant to comment at this stage. He says that will be an exercise for the family and shareholders, if the proposal is confirmed.
“Any discussion really of the properties is another exercise for down the track at the end of the consultation.
“We’ve had a lot of thoughts but it’s premature to talk about them now. We’ll wait till the decision’s made.”
Editor-at-Large Shayne Currie is one of New Zealand’s most experienced senior journalists and media leaders. He has held executive and senior editorial roles at NZME including Managing Editor, NZ Herald Editor and Herald on Sunday Editor.
Auditors PwC: Cited disruptions to operations from that IT upgrade.