A sign apologising to customers for the closure of Smith & Caughey's on Queen Street, Auckland, on 29 May, 2024. Photo: RNZ / Louise Ternouth
Iconic Auckland department store Smith & Caughey's has announced it is in talks to shut its shop and online stores, likely early next year.
The proposal was announced to nearly 240 staff members on Wednesday morning. The stores will be closed for the rest of the day but will open on Thursday as usual at 10am.
The department store, which has been in business for about 144 years, said its proposal would be under consultation with staff for about five weeks.
It is considering feedback from staff as well as any other avenues to potentially continue.
Smith & Caughey's chairperson Tony Caughey said it was a "deeply emotional" time for customers, suppliers and staff.
Smith & Caughey's chairperson Tony Caughey. Photo: Supplied / Smith and Caughey's
"Since its founding by Marianne Smith, nee Caughey, in 1880, Smith & Caughey's has focused on serving the people of Auckland, whilst preserving the traditions cherished by generations of discerning shoppers," Caughey said.
"However, over the last five years we have experienced a 40 percent decline in revenue from our physical stores from factors largely outside our control.
"As a result, the company is trading at a significant loss which is unsustainable. Sadly, we do not believe sales can be restored to levels necessary to continue to operate."
Smith and Caughey's on Queen St, Auckland. Photo: Supplied / Smith and Caughey's
There was a "perfect storm" of factors, including increasing competition from new malls, more luxury brand stores, and roadworks in the CBD, which contributed to the decision, he said.
"In addition, the aftermath of the Covid pandemic has led to a reduction in the number of office workers in the central city on any given day, followed by the huge drop in consumer confidence and the mounting impact of the cost-of-living crises.
"While long term there will be a positive impact from the City Rail Link with Te Waihorotiu Station in mid-town, the expected upswing in foot-traffic and consumers into the city is still several years off."
Smith and Caughey's on Queen St, Auckland. Photo: Supplied / Smith and Caughey's
Despite the Board analysing more than a dozen options for the future of the business, no solution to deal with the associated risks in further investment were found, he said.
"Sadly, we don't believe this is a storm to be weathered.
"In the absence of strong consumer confidence, an essential element for a prestige retail organisation, the company is concerned that it may no longer be able to sustain the impact of a continued sales drop in our physical stores compounding the impact of the past five years.
"This is an unsettling position for the staff, board and shareholders.
"We must be realistic and at the heart of us commencing this consultation process now, is the need to look after all Smith & Caughey's staff as well as we can, and to operate in good faith."
Christmas decorations for Santa's visit at Smith and Caughey's on Queen St, Auckland. Photo: Supplied / Smith and Caughey's
Caughey acknowledged the famous Christmas traditions at the department store, including Santa visits and colourful displays in its windows.
"For this reason, if the proposal proceeds, the plan would be to cease operation likely in early 2025.
"Whatever the outcome of the consultation process, our intention is still to offer our traditional experience of inspiring world class Christmas windows, Santa's Enchanted Forest and Santa Claus himself."
The department store also noted other closures of big stores in New Zealand and abroad in recent years due to challenges in the sector, including H&J Smith, David Jones, and Debenhams in the UK, as well as downsizing of Macy's in the United States.