Inside the fiercely private Aussie retail business.
On a revenue and store basis, it’s not as big as you think … Image: Suren Naidoo, Moneyweb
By now, Australian retailer Cotton On would’ve had well over 300 stores in South Africa … if everything had gone according to a plan announced in 2014.
At that point, it had just opened its 100thstore inside of three years – making this market its fastest-growing globally. Fast forward nine years and it has fewer than 200 stores across its Cotton On, Cotton On Body, Cotton On Kids, Factorie, and Typo brands.
The Covid-19 pandemic, intense load shedding and a stagnant economy would’ve all played a role in the privately-owned group dialling back its expansion plans in this country.
Still, South Africa remains its third-largest market globally, by number of stores. Australia leads with 662 (at the end of last year), with the US at 194 and South Africa at 169 (New Zealand had 107).
A bland filing with Australia’s securities regulator at the end of October shows just how big its African operation is (large corporates in Australia are required to file audited accounts annually, even if they are not publicly owned like COGI Pty Ltd).
This is down by 6% year on year (from R2.34 billion in FY2022).
In Australian dollar terms, the decline is double at -13% given that the rand was less weak between July 2021 and June 2022 than in this financial year.
Around 95% of its revenue is comprised of retail sales, in other words, sales through its own stores. The remainder is from wholesale sources, which at this point comprises Superbalist and Takealot.com. Margins on wholesale revenue will be lower than on its retail revenue.
The group has a handful of stores in Namibia and Botswana (combined), so practically all of these sales are from South Africa.
(Much is made of the fact that Cotton On owns the Typo chain, but realistically these stores probably generate an average basket of around a quarter of its clothing stores. They ate CNA’s lunch, and filled that gap, but have a relatively small contribution in the overall picture.)
How does the group compare to other South African retailers?
Total revenue is at about the R26.4 billion mark, with 58% of this – close to two-thirds – still coming from its home market of Australia and New Zealand (there will be some impact from weaker emerging market currencies in the last year distorting this contribution).
That puts the total group at close to twice the size of Truworths Africa, which posted retail turnover of R15 billion for the year (up 9%).
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