Tomislav Babic Claims Varteks Won’t Leave City of Varazdin

Lauren Simmonds

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As Novac/Jutarnji/Visnja Gotal writes, Varazdin’s Varteks is once again emerging from another crisis. After wage arrears built up back during the summer months, one of the few remaining once-textile giants has finally re-stabilised its business. By selling part of the company’s inactive real estate/property, the arrears managed to be paid out and raw materials were procured in order to increase the company’s production capacity.

The coronavirus pandemic dragged the textile industry into very uncertain waters, so even the biggest ones began to need to further rationalise their business, among them Hugo Boss, which terminated its contract with the people of Varazdin for the sewing of top quality men’s suits. Varteks, which is still recovering from the large debts that the company was brought into by the former management, had a hard time terminating its contract with Hugo Boss. All this misery after, a mere three years ago, it got a new ownership structure and re-strengthened its market position.

If Varteks didn’t have thousands of square metres of inactive property in an attractive Varazdin location under its belt, partly along the main road to Zagreb, partly nestled in a quiet family neighburhood, it would hardly have been able to overcome the coronavirus crisis, despite new leadership and loyal employees. Many with significantly better starting positions at the beginning of the pandemic didn’t succeed either.

That said, Varteks has been saved from the depths once again, and the company’s new autumn-winter collection won over the audience and critics. Tomislav Babic has no plans to try and hide his satisfaction:

I’m even surprised by the speed with which everything is moving along. The land in the northeast of the complex was sold to the Austrian company SES, the sister company of Spar. There will be a retail park with several shops. We also have a pre-contract with Kaufland, which can be turned into a full contract very quickly. In addition, the City of Varazdin is interested in an old hall we have, which would be converted into a concert hall if they decide to take it. It’s an old tailor’s shop and the building of an old machine shop, a very interesting architectural building with industrial architecture, for which, in addition to Varazdin’s administration, there are other interested buyers.

I wouldn’t want to talk about figures and numbers until things are wrapped up and finalised. When we sell the office building, Varteks will be rented out, which is more financially viable for us. Varazdin lacks one such format of office building and these are all buildings that once enjoyed the preliminary protection of conservators as cultural heritage. They won’t be demolished, even though they’re no longer under protection, but our intention is to preserve the valuable heritage anyway. Due that building’s size and position, it is ideal for, for example, a larger medical office or a law office. There are still a few buildings that we will sell as they are, with the intention of preserving the industrial design of the complex. There#s also a state-owned plot, which should be handed over to the City of Varazdin for social use, a kindergarten, a square or something else. Basically, Varazdin gets a whole new neighbourhood in this important location.

Are investors showing interest in housing?

They’re showing that the interest in housing is growing. For this purpose, 50 thousand square metres are intended in the western part of the complex, adjacent to a quiet neighbourhood with family houses. In front of this residential area will be a park of ten thousand square metres, and mostly Croatian investors are interested in that.

What will you invest your sales money in?

With the money from the first sale, we paid out salaries, paid our taxes, bought fabrics and stabilised the business. We’ll invest the funds from future sales into business development. The salary delay was due to the coronavirus crisis. The departure of Hugo Boss means a big drop in orders, which we cannot compensate for with our growth. So there was a loss that we will now cover by selling off our real estate. Many times, precisely because of the departure of a large foreign customer, we interrupted our work, but we didn’t lay off any of our workers. We’re going to keep them for next year, when we aren’t going to have a surplus of workers. Moreover, it’s safe to say that we’re likely to lack workers. Half of all the money we receive will go to the banks, to close old debts. We’ll also work with resale money.

What about the Varteks brand?

We’ve reorganised production and are filling our capacities with our own production, which was once done for us by subcontractors. The Varteks brand is going fantastically, the autumn-winter collection is, according to the interest shown, great. It’s the work of old and new, young designers, under the creative guidance of Martina Ranilovic Vrdoljak. Many young, educated people got jobs at Varteks and moved to Varazdin. The collection intended for 25 plus was supposed to be out in 2020, however we had to cut the most beautiful part of it because of the coronavirus crisis. People weren’t going anywhere, there was a lockdown, so sales of coats and suits dropped drastically. Now things are different. People are eager to shop, our collection is great, the competition doesn’t really have much to show for itself because it comes from Asia and delivery routes are far slower and more expensive. We have our own production right here so we can react quickly and fill the stores.

What about exports?

We’ve opened up two new stores in neighbouring Slovenia this year, in Maribor and Ljubljana, which was a brave move to open shops in the middle of the pandemic. A lot of Slovenians came to Varazdin because of Varteks and they make up some good traffic through the web shop, so we brought Varteks to them. The last store in Slovenia was closed about ten years ago, and these two new stores are quite enough for now. We also export to Bosnia and Herzegovina, but not too much, and we also export our products under the J. Lindeberg label all the way to China. It’s to our credit that our products are being sold in China. We also export to Germany and Sweden to our partners, and web sales are growing across Europe. We’re now moving more aggressively into the direct export of our own brand products. and the price of a luxury product is always sustainable. There are always buyers of luxury goods, and with the coronavirus pandemic, that market has grown. We’re just building up our market share. We started from low positions and we can only conquer markets.

There was also talk of moving the company away from Varazdin…

There’s no way that will happen. Varazdin developed alongside Varteks, Varteks originated in Varazdin. It’s a symbiosis and always will be. Although it is no longer as important as it used to be, Varteks is definitely staying put in Varazdin. Most of our workers are from Varazdin County and it is a mission impossible to move Varteks at all. Not even to nearby Novi Marof to the former Levi’s factory. True, it’s only a thirty minute drive, but we’d lose a lot of workers, which is out of the question.

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