Landmark retailer scales down

2014-01-22 00:00

HIRSCH’S Pietermaritzburg has become a casualty of tougher conditions in big-box retail as store chains fight rising costs and lacklustre consumer spending.

Hirsch’s massive 10 000 square metre operation in Chatterton Road is closing, and a smaller “concept store” is planned, possibly at Cascades Mall.

Hirsch’s chief operations officer Margaret Hirsch grew up in Pietermaritzburg and the company opened a branch in the city in 1988.

“My heart is in Maritzburg, but this is a business decision,” she said.

Kay Makan Electronics, which closed two stores last year, at Liberty Midlands Mall in Pietermaritzburg and at Umhlanga Ridge, cited “a retail sector that is quiet, with consumers not buying” and “soaring costs and rentals” as reasons for their earlier downsizing.

The company’s two remaining stores, in Victoria Road in Pietermaritzburg and Overport in Durban, are on properties it owns, and there were no plans to further downsize.

Neil McLean, marketing executive of Hi Fi Corp, which is owned by JD Group, said its Pietermaritzburg branch was cutting showroom space, “to reduce rental costs and increase trading density, and to make the space more productive”.

“It is very competitive in Pietermaritzburg, and as you know, retail sales are down in most industries,” he said.

Work began in January to reduce the shop floor space by 400 square metreshe said.

“Stock levels will remain intact and replenishment will continue as normal from the warehouse,” McLean said.

Another big electronics retailer, Govan Mani, said they would decide in two months whether downsizing was on the cards, but director Bootie Chhotu insisted this was not an option for Pietermaritzburg.

Hirsch said the downsizing does not indicate a move to downsize Hirsch’s countrywide.

In fact, new stores were opening in Pretoria and Cape Town this year.

“We hold around R22 million in stock at any given time on the floor at the Pietermaritzburg store, and the question has been: do we keep this huge investment here or do we scale down?”

Retail sales in general, particularly for big ticket items, have been weak over the past year as consumers struggle with high debt, unemployment, low economic growth and rising costs. Nearly half of all borrowers are struggling to repay their debts, according to National Credit Regulator statistics.

Online store sales are however growing fast and a trend to cut retail floor space and employment, as Hirsch’s has done, is likely to gain traction.

“If you think it is far away, think again,” Sasha Naryshine, senior analyst at Vestact Asset Management said in a note yesterday.

Hirsch said there would be no forced retrenchments — the 25 employees at Hirsch’s Pietermaritzburg branch have all been accommodated.

Ten have been relocated to Johannesburg and Durban, and five have chosen retrenchment. A planned smaller “concept store” will employ eight to 10 people.

It is understood that Massmart, which operates Makro and Game stores in Pietermaritzburg, will not be reducing the floor space of its high-tech products areas.

Massmart, majority owned by U.S. retailer Walmart, last week reported an annual sales increase of 10% for 2013, which it described as muted, but which had been aided by markdowns over the Christmas period.

Hirsch said they were in “in the process of securing premises at Cascades” to relocate its Pietermaritzburg branch to a smaller “concept store”.

The concept store will keep fewer product examples on the shop floor, but the full range of items offered at Hirsch’s countrywide will still be available for delivery in Pietermaritzburg.

Hirsch said online shopping had become “huge” for Hirsch’s. She said December was the company’s “best month ever”, but she admitted the sector has been under pressure to cut costs.

Hirsch’s current property is being sold to Willmeg Investments for an undisclosed amount.

Willmeg Investments’ chief executive officer is Craig Steel, who also owns Sutherlands Home Furnishings (SHF).

The sale was expected to be finalised by January 31, said Willmeg Investments financial manager Paul McCabe, and will in future be known as The Square.

“SHF will be the anchor tenant,” McCabe said, and added that Willmeg Investments was in negotiations with other potential retail tenants.

Pietermaritzburg Chamber of Business CEO, Melanie Veness said, “It sounds like … a win-win for Pietermaritzburg — a new concept Hirsch store, as well as a significant investment by Sutherlands.”

Veness said entrepreneur Craig Steel had grown Sutherlands from a small furniture restoration shop in Chapel Street into the formidable business.

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