Hallenstein Glassons coy on any store closure plans

There's uncertainty ahead for the retail sector. Photo / Getty Images

Hallenstein Glasson Holdings remains tipped-lipped on any plans to close stores in its women's and menswear retail chains.

The NZX-listed retailer, which operates Hallenstein Brothers and Glassons stores in New Zealand and Australia, has warned that it expects to post a $2.8 million loss for the 14 weeks to April 30. It is hopeful its fourth-quarter sales will improve.

Mary Devine, group managing director of Hallenstein Glasson, said it was "early days" and too soon to know the full impact of Covid-19.

Asked about any cost-cutting measures the group would undertake in the months ahead, Devine said she could not disclose specifics.

The group was now starting to "get a feel" for how it was trading after lockdown in the changed environment and would make decisions on a store-by-store basis, she said.

"Our position at the moment is as leases come up for renewal we'll continue to take a strategic view and evaluate accordingly," Devine told the Herald.

"Now, with reopening stores, we're finding our rhythm as business.

"We have been pleased about the initial response we've had, but overall we're remaining cautious because we do think there is going to be a challenging economic environment ahead."

The typically media-shy company said it had experienced a strong uplift in online sales, even after the reopening of its bricks and mortar stores, a large portion of which it expected to be permanent.

Online sales accounted for more than 15 per cent of all group sales in its first six months of its current financial year. Devine could not disclose the revised proportion of online sales.

In its latest NZX update, Hallenstein Glasson said it anticipated trade profitability from May onwards, but at lower levels compared to the same period last year, due to "a likely decrease in foot-traffic, increased levels of unemployment and related economic impacts."

Devine said retailers were already looking at downsizing their store portfolios even before Covid-19 hit.

"Overall in retail we are getting increasing traction via digital and online business, I think there was a general sentiment, particularly over the last 18 months, that retailers have been quite critical of what is the appropriate store portfolio.

"Coming through the Covid experience, we've all experienced uplift in our online sales, so I think that makes all retailers more critical of what the appropriate store portfolio is going forward."

The sustained increase in online sales after the stores reopened showed that consumers had become more comfortable with shopping online, Devine said.

"It's fascinating times in retail because just what the state of the landscape is going to be in six months' time will be interesting for us all," she said.

"Bricks and mortar are still fundamentally part of the retail experience for customers; people love to come into store and touch and feel product ... the ultimate right balance between digital and bricks and mortar I think that is going to evolve over time."

Over the past two years, Hallenstein Glasson has invested in its online shopping channels to accommodate an increase in e-commerce sales. It has invested in all three of its distribution centres in Christchurch, Auckland and Sydney.

Online sales accounted for 15 per cent of all group sales at Hallenstein Glasson prior to Covid-19. Photo / Jason Oxenham

In February, it moved into a brand distribution facility in Sydney and completed its Glassons New Zealand distribution centre in October and Hallensteins centre in the middle of last year. The group deployed its retail staff to its distribution centres to fulfil online orders during lockdown.

"The investment we've made in those distribution centres has been highly relevant," Devine said. "We've been fortunate that [e-commerce] has been a clear area of focus for the business for recent times and we're starting to dividends now of that investment."

Hallenstein Glasson employs more than 1600 staff across its 126 stores in New Zealand and Australia.

Its current financial year will end next month.

In its first six months of trade to February 1, the company posted a net profit after tax of $15.4m, down from $16m reported in the same period a year earlier.

Store closures

Over the past four weeks, a tranche of large retailers announced store closures as part of cost-cutting measures in response to the impact of Covid-19.

Max Fashions is the latest retail chain to announce it would downsize its store network, proposing to close 17 stores - almost half of its locations - after a zero balance sheet during seven weeks of lockdown.

Jamie Whiting, managing director of Max Fashions, said the retailer was "devastated" by the move, but had no choice to make the decision to "ensure the survival" of the business.

The announcement follows that of The Warehouse Group's on Monday - the company said it planned to close another six stores, taking its total store closures to nine, laying off more than 1000 staff, including 130 in its head office.

Fellow NZX-listed retailer Michael Hill last month announced it would close nine stores worldwide, including three in New Zealand. It signalled that more closures were likely.

Smiths City, Bunnings and South Island retailer H&J Smith have also announced they will close stores in their portfolios.

Analysts anticipate more closures are to come as the economic impacts of Covid-19 are realised in the months ahead once the 12-week wage subsidy extension ends.