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Hamleys SA in business rescue as malls face more headwinds

Toy shop chain has already closed one of its biggest stores.
Sad sight: Hamleys at Mall of Africa in Midrand. Picture: Moneyweb

World-famous toy retailer Hamleys’ South African franchise operator Ensolor is in financial trouble and has been put into business rescue, Moneyweb can reveal.

Several retail property industry sources have indicated to Moneyweb that the company’s financial difficulties could be linked to fraud.

Cape Town based Ensolor’s financial woes have already resulted in the closure of one of its biggest Hamleys stores, located at JSE-listed real estate investment trust (Reit) Attacq’s Mall of Africa shopping centre in Waterfall City, Midrand. Another smaller Hamleys store at Nelson Mandela Square in Sandton has also closed up shop.

More store closures could be on the cards, resulting in a further blow for some of SA’s larger shopping centres, already under strain from weak economic conditions as well as Edcon’s downsizing and possible closure.

In an emailed response to Moneyweb’s queries yesterday (Wednesday), Stefan Steyn of Business Rescue Partner – the business rescue practitioners now managing Hamleys’ South African operations – confirmed that Ensolor (Pty) Ltd was put into business rescue on January 22.

Rescue efforts

“The function of the business rescue practitioner is to implement measures to try save the business and pay creditors,” he said, adding that this process is already underway.

“Currently, the creditors are in a process with the business rescue practitioners, where we are resolving claims and following the business rescue steps. The shops are operating and are currently trading as usual, except the Nelson Mandela Square shop (which the company was going to close anyway) and the Mall of Africa shop, where we have agreed with the landlord to vacate and make way for another tenant.”

Asked if further Hamleys stores could close and how much debt the franchise was in, he said: “It is uncertain which stores could or may close, and the business rescue plan will make proposals in this regard, once it is completed … This [debt] is a matter for the creditors concerned, and any possible investor. We are requiring non-disclosure covenants before making sensitive disclosures, suffice to say, we are working to save the business and the jobs of several hundred employees.”

Questioned on the likelihood for the business rescue process to succeed, Steyn said: “We hope that it is very likely and we are working hard to achieve a positive result. We are fortunate to have the co-operation and support of many stakeholders, including staff, management and creditors.”

‘Great brand’

Steyn added: “Fortunately, it [Hamleys] is a great brand, and it continues to trade, and is well stocked. Hopefully this will be the key to a successful turnaround and will bring an end to the business rescue, in due course, on acceptable terms to the stakeholders.”

Moneyweb understands that negotiations are underway with potential suitors to save the business, however Steyn would not comment on this or on alleged fraud at Ensolor.

Hamleys opened in SA amid much hype in 2015 as the trend of international retail brands coming into the country peaked. Following the closure of its stores at Mall of Africa and Nelson Mandela Square, it now has eight stores in major SA shopping centres. Most are located in Gauteng, with one store at the V&A Waterfront in Cape Town and another at Gateway Umhlanga in Durban.

Six Hamleys stores in Gauteng – as well as one each in Cape Town and Umhlanga –are still operating. Picture: Moneyweb

The woes of Hamleys in SA come as its operations in the UK are also under financial pressure. According to UK media reports in October last year, the group posted a £9.2 million loss for the year to December 31, 2017. The chain blamed Brexit as one of the main reasons for the downturn.

Hamleys, the world’s oldest toy store chain, also closed several stores in the UK, where it opened its first store in 1760. The brand is now owned by the Hong Kong listed C.banner group.

Commenting on the possible impact of Hamleys’ closures in SA, Keillen Ndlovu, head of listed property at Stanlib, said:“It’s another challenge for retail landlords. Some of them had to deal with Stuttafords’ failure and most of them are busy trying to find a solution for Edcon. Now they have to deal with this [Hamleys]. However, the impact is not as big on an overall basis since Hamleys has fewer than 10 stores in the country.”

Responding to Moneyweb’s queries, Attacq’s head of marketing, Minisha Patel, said: In line with their own internal business rescue processes, Hamleys took the decision to close their doors on Thursday, February 21, 2019.

She noted: “The store occupies 1 000 square metres, which equates to less than 1% of the total PGLA [primary gross lettable area] of Mall of Africa … Attacq is currently in negotiations with various retailers for the space. We are optimistic that suitable tenants will be secured in the near future.”

Meanwhile, on Edcon reducing the space of its flagship Edgars store to one floor at the mall, Patel said: “We commenced negotiations with the Edcon management team early in 2018 and we firmly believe that the restructure of this space is positive for the mall and our shoppers.”

Shrinking presence: Edgars will have a smaller store at Mall of Africa. Picture: Moneyweb

She confirmed that a new Pick n Pay store will be opening in the lower floor space being vacated by Edgars in the third quarter of this year.

Asked about the vacancy rate at Mall of Africa, she said: “As at December 31, 2018, we had six shops vacant at less than 1% vacancy ratio rate. Hamleys vacated this month … More information [on vacancies] will be provided at Attacq’s results presentation next week.”

Picture: Moneyweb

Attacq hopes to secure replacement tenants soon. Picture: Moneyweb

Patel added: “It is important to note that the Mall of Africa’s vacancy rate is lower than the market average. In fact, we are currently in the process of concluding deals with replacement tenants and are confident that the majority of vacancies will be filled within the coming months.”

She said that while the local retail market is experiencing challenges, Mall of Africa’s trading density growth on an annual basis was in excess of 10%.

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9 years of Zuma misrule and a shrinking economy brings everyone down.

Agreed, Mr. Zuma was worse than 10 Hurricanes, 10 Tsunamis and 10 Earthquakes.

As for Edgars, did they not lose about R21 Billion in one investment about 10 years ago?

Exactly!

The fact that SA has an unofficial unemployment rate of some 40% and that this has dragged the retail trade into a swamp of despair escapes the political numbskulls.

And how do you employ the unemployable with their poor school education or the paid-for college “diplomas” and no real knowledge of how a business runs?

Sigh …

Look at the bright side, our universities produce thousands of graduates each year with BA degrees in political science, philosophy, diversity studies and now also degrees in “decolonisation”. To boot, they all study for free compliments of the taxpayer. It is actually somewhat of an insurance policy. If they don’t get the opportunity to study these useless degrees for free, they will burn our universities completely down. So let them carry on…

Well, this is not a surprise. Selling toys at a profit is harder than it looks. They brought a European business model to an African country. My kids and I often popped into their stores on our way somewhere else. The stores look good but their product range isn’t very wide, and some products were just wrong for South Africa, e.g. plastic model kits in a toy store. Always had the impression that Hamleys SA was started by a bunch of guys from the UK who went to Cape Town for a holiday and thought that Cape Town is a lot like London.

Little kids have an amazing ability to maintain a mental inventory of the contents of toy stores. According to my kids, and their friends, this is how toy stores rank in SA:

1. Toyzone. Best overall toy range. Prices on new items is a rip-off. Wait for the markdowns. Usually located in cheaper malls close to a major mall.

2. Toys R Us – more expensive than 1. but close 2nd. Often located in expensive malls.

3. Toy Kingdom – probably the next chain to close. More like Hamleys than 1. and 2. Only toy store to offer 50% to 80% discounts on products which tells me their product selection isn’t great and they’re probably making serious losses behind closed doors. But better than Hamleys. Located inside expensive malls. Build-a-bear shops now located in some Toy Kingdoms. Very bad idea.

Not on the list: Individual sole trader toy shops. Very few of them left, but the survivors know their ship.

Malls are a bore ….places people go to seeking mental stimulation but instead experiencing being a zombie

first time I heard of this “Great brand” ?

Best come out from under that rock then..

…..what are doing looking under rocks?

I don’t know how many times it has to be said for investors and listed funds to acknowledge it but:
– SA is over-traded in malls (not high street);
– SA is in recession and will be up until the ANC change its policies;
– Retailers have had a field day more due to the 10m million plus illegal immigrants in SA rather than SA fundamentals;
– Introducing new brands like top shop etc does not change the fundamentals.

I agree with most of the comments here in that the SA economy is in dire straits also agree that the ANC is one of the main if not the major problems.

I do however find the the thin veneer of racism in the comments disturbing. The use of “them” and “they” instead of “us” is quite telling. Also a puzzling level of schadenfreude because “they” obviously deserve it.

We can have a very long debate about who is exactly to blame for the dire situation SA finds itself in now. The left will lay all the blame at the door of apartheid and the white community, the right (and most of MW commentators will lay all the blame with the ANC and the ethereal “them”. Truth us much more nuanced – as it tends to be. Both sides carry blame, but what is also overlooked is that apart from naturual resources South Africa is a poor country with no clear competitive advantages. Before the discovery of diamonds South Africa was a backwater colony that had nothing going for it except being halfway to India.

What we really need to do us to going and sit down and take stock of what we have and come up with a strategy to be competitive as a country. Tourism is something that comes to mind as an easy gain to pick up low skilled employees.

Make no mistake Zuma had a massive impact, but the mines were always going to come to the end of their lives. Mining propped up our country for a 150 years, but preciously little of that windfall was invested back into the country to ensure a long term future.

Notwarren:

Breath of fresh air. I have notice a interesting thing about this world we live. its batter to push extreme black or extreme white agenda. If you start saying thing for what they are. You will never make it on the populist list.

Simple example is these guys with this store. The stock old toys and kids are brutally up front… It fails you blame Zuma….Interesting…

Parents spend money where kids are happy. We all want quiet in our house holds.

The real villain here is Philip Phaphitis, not Jacob Zuma. This should be highlighted by the journalist responsible for this story.

When I took my family to the UK 40 years ago, we had to visit the fabled Hamleys store, which for the children was a wonderland. When Hamleys came to South Africa, I had grandchildren and thought what a treat to expose them to the same magic their parents had experienced all those years ago.
What a disappointment! It was nothing like the magic of old, but was stocked full of “toys” that had little attraction for kids at play. Subsequently on a visit to London, I decided to revisit the original Hamleys – and guess what, mostly the same uninspiring fare. What had happened? I guess “progress”. No more mystery, or intriguing toys that generated imagination or engrossed kids for hours of play – just disposable junk.
I suppose times have changed, but so has Hamleys and in the process has lost its ability to create an expectation of wonder and excitement, so I’m not surprised that it is floundering.

Was in the toy business, after some serious research sold it 15 years ago. Hamleys, Toys are us etc are looking for the wrong excuses to why sales have dropped. The whole child concept has changed. Kids under age 2 are already on tablets and smart phones then comes games. Toys are no longer important and basically history.

You hit the nail on the head. Kids today actually prefer to watch Youtube videos of other kids playing with toys. To add to the problem toys from the likes of Hamleys are way overpriced for the average South African customer.

As South Africans we need to look at the root cause of business failures. Blaming everything on the ANC is hardly progressive thinking.

End of comments.

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