TALLINN - In a sign of the difficult economic times faced by the Baltics, Hobby Hall, which has been active in the region since 1992, has announced that it is going to close its operations in the Baltics this year.
Hobby Hall is a distance retailing business, driven by catalogue and online sales. In a company announcement dated May 11, company spokespeople confirmed that they would cease their business in the Baltic countries by autumn 2009 and thereafter would focus on the development of their operations in Finland.
The company said it made the move because the business was no longer profitable.
"Discontinuation of the unprofitable Baltic business is part of the ongoing measures to improve Hobby Hall's financial performance," the press release said.
"Quick escalation of the financial crisis in the Baltic countries has brought a substantial deterioration in purchasing power, leading to loss-making operations, and there are no foreseeable opportunities in the next few years to improve the profitability of the business," it said.
Competitors said the move came as a surprise, and that they thought it would not be too difficult to survive the crisis.
"It is a big surprise" Mari Rahumagi, manager from Quelle, Hobby Hall's competitor in the online/catalogue retail business, was quoted by Postimees as saying.
"We should be able to cope in this crisis for a year or two, but if you have been in the market long term, this kind of short term crisis shouldn't frighten you off."
Tauno Tuula, manager of Anttila, the third biggest distance retail business in the country, said the news would have both positive and negative consequences for the rest of the market.
"I have said before that distance retail businesses are exactly the same as other shopping centers. The more there are, the better it is for all." The manager also said, however, that hopefully now some of HH clients will join them.
He said Anttila owners did not plan on leaving Estonia, even though their sales and profits have fallen just like competitors at about a rate of about 10 to 20 percent.
Currently the company employs 63 people in Estonia and 19 in Latvia. All these jobs will be lost. The Lithuanian business is currently serviced by the Latvian operation, so no additional layoffs will take place there.
Hobby Hall has operated in Estonia since 1992, in Latvia since 2000 and in Lithuania since 2002. The combined Baltic sales for 2008 were 33 million euros 's close to one fifth of Hobby Hall's 2008 sales total of EUR 191 million. However, this was a decline of over 12 percent from the previous year.
Although part of the Stockmann group, Hobby Hall had until recently operated as an independent entity. In addition to its distance retailing business it also operated one store in Tallinn.
Stockmann CEO Hannu Penttila said Hobby Hall's operations in the Baltic countries had failed to achieve a sufficient level of profitability throughout the past decade. He also claimed that the financial crisis in the Baltic's had lead to a substantial deterioration in purchasing power, which was resulting in loss making operations.
He did not foresee any opportunities in the next few years to improve profitability, leading to the decision to terminate operations in the region.
"The non-recurring expenses from the closure of operations will not significantly exceed the operating loss that would arise if the operations were continued until the end of 2009," the press release said.
Early this year, Stockmann made the decision to integrate Hobby Hall into Stockmann's Department Store Division as from the beginning of 2010. Hobby Hall will continue as an independent division throughout 2009.