Category Archives: #southafrica
The news follows on the group’s interim results, which showed a 32% rise in sales in rand terms in SA. The rise came at the expense of local retailers such as Mr Price and Edcon.
“We see a lot of potential in SA,” said H&M South African country manager Pär Darj.
Three stores will be opened in Cape Town from September to November. The remaining three will open in Witbank, Richards Bay and Durban during the course of the year.
The Canal Walk store in Cape Town – to be opened on November 18 – will cover more than 4,600m² on two levels.
“We are extremely excited to be opening yet another flagship in the western part of the country,” said Darj.
H&M’s expansion comes at a time when local and international fashion brands are finding it harder to eke out sales gains as consumers come under increased pressure.
International fashion brands Mango and Nine West, which were brought to SA by House of Busby, closed their stand-alone stores in March. British retailer River Island, which has a presence in Rosebank Mall, Sandton City and Mall of Africa in Gauteng, Canal Walk in Cape Town and elsewhere has exited the country in the past month.
Analysts have warned it is going to become even tougher for clothing retailers. Since the beginning of 2017, retailers of textiles, clothing, footwear and leather goods have experienced sharp declines.
The Statistics SA retail trade sales report for April showed this segment of goods recorded a 4.7% drop after a 5.1% decrease in March.
The Foschini Group could be bringing some of its 22 brands to Australia: What will land first?
Aussie retailers could soon see yet another influx of new competition, with South African retail giant The Foschini Group (TFG) saying it’s considering bringing some of its 22 retail brands Down Under.
Speaking to Fairfax, TFG chief executive Doug Murray said the group is looking to build a “mini-TFG here in Australia” after its $302 million acquisition of Retail Apparel Group last week.
The acquisition will see TFG add menswear brands Tarocash, .yd and Connor, as well as women’s activewear brand Rockwear to its stable. Foschini already has a number of brands across, jewellery, homewares, tech, and other specialty fashion.
Murray told Fairfax the group is looking to start a brand migration to Australia with its jewellery retailers, specifically diamond jewellery and watch retailer AmericanSwiss.
“We’ll go through each of our brands and do our research and make the call of which brands come in under this platform,” Murray told Fairfax.
“We’ve done full market research on jewellery … and we believe there would be an opportunity to bring one of our jewellery chains here, probably AmericanSwiss.”
The other jewellery chains under TFG’s umbrella are Sterns and Mat and May.
However, retail expert and academic at Queensland University of Technology School of Business Gary Mortimer believes the Australian jewellery retail space is crowded, and a jewellery or watch retailer would be “the last business I would consider opening here in Australia”.
“We’ve got a number of high profile jewellery retailers such as Prouds and Michael Hill which are starting to position themselves further up in the market,” Mortimer told SmartCompany.
“It’s a tough market to crack as the type of purchases made there are frequently related to discretionary spending which has recently been quite low in Australia.”
TFG also owns two different sports retailing brands; Sportscene and TotalSports, and Murray believes there’s possibility to bring one to Australia along with homewares brand @home.
However, Foschini might leave its “ladieswear” business out of the equation for some time.
“Sports is certainly one we’ve spoken about and we’d like to see how we could take that one forward,” Murray told Fairfax.
“Foschini is a very good ladies wear business but to bring another ladies wear business into Australia … we might get there one day but at the moment there are other opportunities.”
Mortimer believes TFG’s overall strategy makes sense, as Australian shoppers are keen to try out new brands, and there hasn’t been a “great deal of choice” in areas such as sportswear, which have been dominated mostly by Rebel Sports or Super Amart.
This has changed somewhat in recent times, with global retailer JD Sports opening its first store last month, and French sporting retailer Decathlon on the way.
Both Murray and Mortimer believe these specialty-focused stores are the future of Australian retail, with Murray highlighting TFG’s position as a specialty retailer.
“We are not department store lovers, we think department store retailing is generally out of favour long-term worldwide – you can see that in America and Australia and South Africa,” Murray told Fairfax.
Mortimer agrees, saying the days of department stores “are numbered”, with retailers like Myer shutting a number of their regional stores.
“The way Australian consumers shop today is not with department stores, as we’ve got such a great range of specialty stores,” he says.
“Shoppers are more likely to walk into a specific brand’s store than a multiple level department store.”
TFG’s brands include:
• Charles & Keith
• Colette (South African franchise)
• G‑Star Raw (stores already in Australia)
• Phase Eight
• SODA Bloc
• The FIX
• American Swiss
• Mat & May
SmartCompany contacted TFG but did not receive a response prior to publication.
Mr Price earnings up due to successful retail formula
JOHANNESBURG (Reuters) – South Africa’s Mr Price Group Ltd posted a 12 percent drop in full-year earnings, the first drop in annual profit since 2001, as consumers struggle in a sluggish economy.
The no-frills retailer, which also sells homeware and furniture, is facing increased competition from international chains Zara, H&M and Cotton On and has lost market share as local competitors, such as the ailing Edcon, mark down stock.
“This was the Group’s first earnings decrease in 16 years during a very difficult trading period,” Chief Executive Stuart Bird.
Mr Price blamed a drop in sales on weak consumer sentiment as political turmoil culminated in President Jacob Zuma firing finance minister Pravin Gordhan in March and credit ratings agencies downgraded the nation to sub-investment grade shortly after.
“Cabinet reshuffles and downgrades by ratings agencies have caused further exchange rate volatility, which the consumer ultimately has to absorb,” the company said.
Mr Price, which has grown over the past three decades by undercutting competitors and catering to thrifty shoppers’ fashion needs, said a mild winter caused rivals to mark down stock to match its own prices, further weighing on sales.
Edcon, an unlisted retailer, has had to restructure debt and clear old stock at much lower prices. Woolworths also marked down stock in what its chief executive Ian Moir described as a “feeding frenzy”.
“The retail environment has become more competitive, with any growth in a stagnant market coming from increased market share,” Mr Price said in a statement.
Diluted headline earnings per share fell to 887.9 cents in the year to end-March, from 1,012.9 cents in the previous year.
Mr Price maintained its full-year dividend at 667 cents per share.
The company said improvement in the consumer environment is likely to only be gradual, but added that it was seeing encouraging signs in the current financial year.
Retail cannibalisation is becoming a significant feature in the domestic market and it is for this reason that Edcon is shutting down stores where it can, says CEO Bernie Brookes.
Edcon shuts stores in bid to save salesRetail cannibalisation occurs when a company’s new stores steal customers from existing stores. This can reduce overall sales even though sales in the new stores generally do well. Cannibalisation can hurt sales volumes and market share.
“As the leases come up, we are reviewing the stores to see if we should keep them open or not,” said Brookes.
“It’s the most sensible thing to do, especially if you consider the market as it is right now. If you look at Mall of Africa, for example, our store there has taken sales away from stores close to that area.
“In some cases, we are looking at reducing store size by closing certain departments or floors,” said Brookes.
In the year ended 25 March, Edcon closed eight Edgars stores, four Jet stores and five Jet Mart stores. The retailer closed seven stores in its speciality division that includes CNA, Red Square and Boardmans.
Brookes said fewer stores would be opened in the future.
Morné Wilken, CEO of Attacq, explained that Attacq regards the Mall of Africa as one of its most valuable assets in the Attacq property portfolio.
“This mall is the realisation of a very significant vision and a long-term business journey. We identified a gap in the market to develop something extraordinary in the Waterfall area in the centre of Gauteng, the financial hub of South Africa,” said Wilken.
The 133 000m² first phase has more than 300 retailers and restaurants. When the mall opened on 28 April last year, more than 123 000 people visited the mall. In the eleven months to the end of March this year, over 13 700 000 people had visited the mall at an average monthly visitors’ rate of over 1 200 000 visitors per month.
The best performing months were May 2016 with 1 537 661 visitors and December when 1 517 899 visited the Mall of Africa, according to Wilken.
Despite tough economic times, the Mall of Africa achieved a turnover of R3 427 184 526 for the eleven months of trading to March 2017, at an average of R311 562 229 per month with a highlight month of R491 145 650 turnover achieved in December.
As part of the sustainable environmental approach, a solar rooftop photovoltaic plant, with 15 080 solar panels, has been installed on the roof of the mall.
According to Moneyweb, as of 30 March cashback points will be earned for every R2 spent at stores, from R1 previously. This effectively halves the cashback rate to customers from 1% to 0.5%.
Business Day reports that according to Pick n Pay management, a key feature of the overhaul would be weekly personalised discounts tailored specifically to individual Smart Shoppers based on shopping habits. The aim is to give customers more than R500 in personal discounts over the year.
“With the new Smart Shopper, Pick n Pay will be offering 30-million personal discounts every week or three discounts per customer every Thursday for 10-million customers,” the company said.
The news comes just a few weeks after the retail giant announced it had committed more than R500m to cutting prices on more than 1,300 essential items. Analysts told Business Day that retailers are caught between offering discounts in tough economic conditions and protecting margins.
Smart Shopper, since its launch in 2011, has consistently been voted as one of South Africans’ favourite rewards programmes, no doubt due to its generous nature. The public’s initial response to the programme overhaul has not been one of support.
The retailer’s sales increased 39% in rand terms from the nine stores it has in operation
Swedish retailer H&M has continued on its winning streak in SA, dodging the malaise to which domestic retail players have succumbed.
In the first quarter of its 2017 financial year, H&M’s sales increased 39% in rand terms to about R356m from the nine stores it has in operation.
H&M SA opened its 10th store in Nelspruit last week. Its 11th store will be opened in Polokwane at the Mall of the North on April 8. Europe’s second-largest retailer is one of many global players who have moved to SA in a bid to increase market share and search for untapped markets in the hopes of bolstering performance.
Mergence equity analyst Peter Takaendesa said H&M was growing faster than bigger local retailers due to a combination of strong investment into new stores, effective marketing and “possibly better-positioned product offering”. H&M’s results have come at the expense of Woolworths, Truworths and Mr Price who released less than stellar trading updates and results earlier in 2017.
“We estimate that their [H&M] revenue market share in the South African market is only about 1% now and believe they will continue to gain market share off this low base as well as the factors identified above,” said Takaendesa.
The analyst said the accelerated levels of new store roll-outs were not only taking place in SA but also across some of their operating countries, so “this is a deliberate strategy driven at the group level”.
Head of marketing Leane Adolph said on Wednesday all free-standing stores under both these brands would close by the end of March.
“The company regularly reviews the portfolio’s performance and relevance to market and decided to move the Mango business into the store-in-store concept within Edgars. Similarly, with Nine West, we will keep a wholesale presence [for handbags] in the SA market through Edgars,” she said.
The House of Busby owns the exclusive rights to both Mango and Nine West. The Nine West licence was acquired in 1999 and, until recently, had 13 stand-alone stores throughout the country. Nine West sells footwear, handbags, eyewear and accessories.
The Mango licence was acquired in 2006 and there were nine stand-alone stores in SA. Mango now has 35 store-in-stores in Edgars stores nationwide. Mango sells apparel and accessories. Adolph said that rumours of Busby coming under business rescue were untrue, adding it was not expected that there would be any job losses as a result of the decision to close shop for the brands as affected staff would be accommodated within the group’s structures.
The House of Busby was delisted from the JSE in May 2008, when management, together with Ethos Private Equity, acquired control. The Busby enterprise is valued at about R1.3bn. Busby also owns exclusive rights to many other well-known international brands in SA including Aldo, Forever New, Guess, Steve Madden and Call it Spring.
In the past year, it has acquired the master licences for two new brands, Women’secret and 3INA, which further diversified its portfolio from footwear, apparel and luggage to include intimate apparel and cosmetics.
Adolph said the group was confident that the rejigging of the portfolio would allow it to focus on the growth of the newly acquired brands and to optimise its existing portfolio, “re-emphasising the importance of great customer service and a commitment to delivering consistent, quality, international product at prices that reflect customer value”.
Independent analyst Syd Vianello said it was possible that the group’s pricing model had made Mango and Nine West uncompetitive in a market that was under stress and searching for lower price points.
South Africa’s best products, recognised through a market-leading independent consumer survey, were announced at the Product of the Year gala event in Johannesburg last week.
South Africa’s Product of the Year winners revealedPart of one of the world’s largest consumer-voted awards programmes, this independent consumer survey, conducted by leading global information and measurement company Nielsen, rewards product innovation based on the endorsements of over 5,000 consumer households. Established 30 years ago in France, Product of the Year currently operates in 38 countries to guide consumers and help them find the best new products and services in their market, while also rewarding manufacturers for quality and innovation.
“In this competitive and cluttered market, making informed purchase decisions can be extremely confusing for consumers,” states Preetesh Sewraj, CEO and chief innovation analyst at Product of the Year South Africa. “With limited expendable income, consumers are often unable to test and trial every offering on the market, which is why we aim to take the guesswork out of this process for local consumers, effectively giving them a shortcut to the check-out counter while also saving them time and money.”
To enter, brands submit products for inclusion through an opt-in process in a variety of categories. Winners are chosen through a robust research process that employs best in class research techniques to understand consumer perception of innovation in the market.
In its infancy, Product of the Year award categories extensively covered the FMCG sector, specifically food, beverages, personal care and household care, but these have since expanded to include other important consumer-facing market segments such as automotive, technology, petrochemicals, medical and health products, and clothing, among many others.
The winners are now able to use the distinctive red Product of the Year logo on packaging and marketing, under licence, for a period of 12 months.
Based on the independently verified feedback of the 5,000 consumers surveyed, the most innovative products of the year for 2017 are:
Baby care Epi-max Baby & Junior Range
Beverages Fuze Tea
Biscuits Bakers Eet-Sum-Mor Chocolate Chip
Breakfast White Star Instant Maize Porridge
Dairy Beverages Deneys Swiss Diary Gourmet Drinking Yoghurt
Dessert (Heritage) Ultra Mel Vanilla Flavoured Custard
Female Deodorants Shield MotionSense
Feminine Skincare Johnson’s Vita-Rich
Food (Heritage) Big Jack Pies
Fuel BP Ultimate with Active Technology
Hair Treatment Dove Intensive Repair Treatment Mask
Hairwash Tresemme Beauty Full Volume
Healthy Snacking Planters Nuts
Home Appliances Hisense Ice Maker Refrigerator
Male Deodorants Shield MotionSense
Male Grooming Schick Hydro 5
Mayonnaise Miracle Whip
Mobile Phones Samsung Galaxy S7 Edge
Motor Lubricants Shell Helix Ultra
Popcorn Simba Kettle Popped Flavoured Popcorn
Pourable Sauces Wellington’s New Recipe Tomato Sauce
Television Samsung SUHD TV
Therapeutic Skincare Vaseline Camphor Restore
Wearables Samsung Gear VR
Yoghurt NutriDay Yoghurt
Product of the Year also launched its partnership with BlackBerry Messenger (BBM) at the event. “We were honoured to have in attendance of Adam Patisson, VP the America and EMEA at BBM,” states Sewraj. “It is an important partnership for both us and our category winners as modern consumers increasingly adopt a mobile-centric approach to information sharing and e-commerce. We are therefore well positioned to drive innovation within the mobile channel, to amplify our reach and highlight the work being done to champion the consumer cause.”
Heritage – new category
A Heritage category was included for the first time in this year’s endorsement programme, offering multiple divisions in line with the other established Product of the Year categories.
“South Africa has a strong history of innovation, which means that there are still iconic brands on shelf today that have woven their way into the fabric of our society and continue to offer consumers quality and value for money. While they may not be innovative by today’s standards, we feel they still deserve recognition and should still be considered by consumers at the point of purchase. This is why we chose to expand our footprint and include the Heritage category in the Product of the Year awards,” explains Sewraj.
“Product of Year looks forward to supporting the winners through the company’s innovative and diversified platform. We hope to continue stimulating innovation in South Africa through our brand endorsement programme to ensure that deserving brands and their products get the exposure and recognition they deserve in the marketplace,” concludes Sewraj.
Shoprite has scrapped plans to merge its South African businesses with Steinhoff’s
Shoprite has scrapped plans to merge its South African businesses with Steinhoff’s
South African retail firms Steinhoff International and Shoprite Holdings announced Monday they had scrapped plans to merge their local assets to form the continent’s biggest retailer.
The plan announced in December 2016 was geared to create a discount retailer worth over $14 billion to target Africa’s value conscious consumers.
The companies said in a joint statement they “decided to terminate their negotiations related to the proposed transaction” as their shareholders could not reach agreement.
“The fact that the relevant parties could not reach an agreement in respect of the share exchange resulted in the negotiations being terminated,” read the statement.
The proposed ventured was to be called Retail Africa.
Both companies are leaders in the African retail sector.
Shoprite is the continent’s largest supermarket with a footprint in 14 African countries, including Nigeria, Africa’s largest economy, oil-producing Angola and Zambia.
It was proposed that Steinhoff would sell its African assets to Shoprite in return for a controlling stake in the supermarket chain.
Steinhoff’s African businesses include a range of credit-based household goods and the company also has extensive interests in Europe.
Michael Kors has recently opened its first store in South Africa, in Cape Town at V&A Waterfront Mall. The 2,497-square-foot boutique was designed by the brand’s in-house team and features a neutral color palette for a luxurious ambience. The boutique is designed to reflect the label’s sophisticated, jet set aesthetic.
Michael Kors Cape Town carries ready-to-wear, footwear and accessories from the Michael Michael Kors label, including handbags and small leather goods. The boutique also offers watches, jewelry, eyewear and a selection of fragrances.
“We chose the V&A Waterfront because it’s the top luxury mall in Cape Town, a city renowned for its laid-back glamour,” said Michael Kors. “The city represents the mix of sophistication, glamour and ease that defines everything we design.”
Michael Kors currently operates 816 retail stores, including concessions. There are 944 Michael Kors stores in total, including licensed stores.
The Victoria & Albert Waterfront Mall is home to a number of retailers and brands including Louis Vuitton, Tom Ford, Versace, Zara, Calvin Klein, Gant, and Jo Malone among others.
The trading update is largely upbeat, but investor enthusiasm for the JSE’s retail sector has been tempered
Shares in recently listed healthcare retailer Dis-Chem fell 3.7% on Friday after the release of a trading update for the 22 weeks to end January.
The trading update was largely upbeat, but investor enthusiasm for the JSE’s retail sector has been tempered in recent months after evidence of trading strain in certain mainstay companies.
Still, shares in Woolworths, Clicks and Massmart all finished higher on Friday. Market watchers did point out that Dis-Chem had been trading close to an all-time R24.99 high recorded earlier in February.
Dis-Chem reported retail turnover up 14.3% to R6.7bn, while group turnover was up 13% to R7.3bn.
At face value, the retail segment appeared to have performed vibrantly with comparable store growth and sales price inflation for the period coming in at 9.1% and 6.5% respectively.
CJ Distribution, Dis-Chem’s wholesale segment, increased turnover 15.2% with sales price inflation averaging just 4.8%.
Dis-Chem CEO Ivan Saltzman reckoned trading was in line with expectations. He was encouraged by the performance of the eight new Dis-Chem stores opened in November.
Saltzman noted the new convenience-focused format had traded at densities that were higher than expected.
The company’s Northridge store in Bloemfontein, which was flooded late in 2016, was being rebuilt and would reopen in the second quarter. “Although this had no effect on our comparable turnover number, it did impact both the retail and group turnover numbers by 0,6%,” Saltzman said. Direct losses from the Northridge store were fully covered by insurance.
Saltzman said Dis-Chem continued to expand and planned to add another 21 stores in the 2018 financial year. “This new space, together with maturing space within the existing store footprint, is expected to drive strong retail and comparable store growth in the years ahead, both of which are supported by the resilient health and beauty markets that we operate in.”
In spite of the market’s response to the trading update, Chris Gilmour, an investment analyst at Barclays Wealth and Investment Management, said Dis-Chem remained a “top quality and classy” retail operation.
He conceded that Dis-Chem’s market rating looked incredibly expensive. “But this looks like a very special firm, and I would not have a problem buying the share for the longer term.”
The newly appointed chairman of Edcon said the retailer was too important to fail and would be turned around. Gareth Penny, who took up the position on Wednesday, said he was “confident we can continue to make progress in recreating a world-class retailer”.
New boss vows to overhaul EdconPenny, the former group CEO of De Beers, said Edcon, which is the largest clothing retailer in SA, had 45,000 employees, 9-million registered customers and was a major player in local malls.
“It will be got right,” said Penny, who during his tenure at De Beers was instrumental in reshaping the world’s largest diamond company.
The other board members are Bernie Brookes, Rhidwaan Gasant, Daphne Motsepe, Marti Murray, Grant Pattison and Keith Warburton. Brookes, who is CEO, is the only executive of the relatively small board.
Former Massmart CEO Pattison is the only nonexecutive with any significant retail experience, although it did not involve much exposure to clothing. Walmart has failed to make inroads in the local clothing market with Makro and Game failing to crack the market.
Analysts were generally unimpressed by the list of new directors. “It looks as though Bernie [Brookes] doesn’t want to be challenged,” said Sasfin analyst Alec Abraham.
But Penny said Pattison and Brookes had good hands-on retail experience and as a former chief financial officer of Clicks, Warburton would provide good financial back-up.
He said Motsepe, who is a former Absa executive, and Gasant, who is CEO of Rapid African Energy Holdings, would bring important perspectives to the board. Murray, an American and along with Brookes the only non-South African on the board, “has great experience in dealing with corporate challenges”.
Penny said former Edcon CEO Steve Ross and former Woolworths top executive Andrew Jennings, who had been touted as candidates for the role of chairman, would play an advisory role to the company.
Jennings, who is South African, worked in Australia as a consultant for Brookes in his largely successful efforts to turn around leading Australian group Meyers.
The previous Edcon board also had limited retail experience and was dominated by bankers with a sprinkling of miners. As well as diamond retailing, Penny’s experience includes mining and banking.
Penny said Brookes had done a good job since he took over in October 2015. “We’ve made progress but there is still a significant period ahead.”
Despite a tough local market, Shoprite has edged its rivals and its rest of Africa play is going swimmingly
It has been 27 years since Shoprite, then and until recently led by Whitey Basson, took its first tentative steps beyond SA’s borders.
The move was greeted by widespread market criticism.
Shoprite has, mostly, proven that any pointed fingers have been hopelessly misdirected.
Basson (now retired) termed African expansion Shoprite’s second growth engine and it is proving to be just that.
The retailer’s trading update for the six months to December 2016 leaves no doubts.
Shoprite’s operations in 14 other African countries spanning 375 stores (as at June 30, 2016) delivered an exceptional 32.2% rise in year-on-year sales, to about R12.9bn.
This will take non-SA operations’ contribution to almost 21% of group sales, up from 17.5% in the six months to December 2015.
In constant currency terms, the rise in sales in the latest update period was an even more impressive 51.7%.
Working in Shoprite’s favour is the crippling shortage of foreign currency, particularly in oil-producing countries Angola (its biggest non-SA market) and Nigeria. The currency shortage has left local traders desperately short of their mainstay: imported stock.
It is a situation in which Shoprite is using its financial muscle to full advantage.
“Shoprite has its external balance sheet in SA to fund stock requirements in its African operations,” says Evan Walker of 36One Asset Management.
Availability of stock is enabling Shoprite to attract a whole new group of consumers into its stores: those who have traditionally bought from the huge number of small, informal traders.
“There has been a perception among consumers that Shoprite was an expensive place to shop, suitable for the elite only,” says Joachim Kotze, an equity analyst at Denker Capital.
Now, with those sceptical consumers drawn into Shoprite stores, the perception may well be changing. Shoprite has probably gained a significant number of new, permanent customers, says Kotze.
Walker agrees. “I believe Shoprite has entrenched its position,” he says.
Shoprite is probably not getting much cash, in the form of repatriated profits, out of its African operations.
Independent retail analyst Syd Vianello does not view this as a matter of concern. “They will just continue to use local profits to fund expansion,” he says.
Shoprite’s expansion in Africa remains vigorous, with more than one new store being opened every week. The number of stores outside SA by the end of 2017 is targeted to stand at 415 — that is 58 (16%) more than a year earlier.
Though Shoprite’s operations outside SA were the highlight of the trading update to December, local operations more than held their own. They did so in a market where most consumers are being hit by rampant food-price inflation, slowing household income growth and difficulty in accessing credit.
Trading through more than 1,170 Shoprite, Checkers and USave stores, the SA supermarkets division (the core of group operations) ended the six months to December with year-on-year sales rising 10.7% to just on R51bn and sales volume lifting 3.3%. On a like-for-like (same store) basis, sales were up 7.4% — in line with internal inflation at the same level.
“It was a very good showing,” says Walker.
Woolworths is the only competitor with which an up-to-date comparison can be made.
It was no match for Shoprite.
Despite Woolworths priding itself on the resilience of its core market — the upper-income segment — in the 26 weeks to December 25 it reported food volume growth of only 0.3% and a 3.6% fall in like-for-like sales volume.
Shoprite’s R5.2bn annual revenue furniture division also shone, lifting sales by 10%.
The division operates through 53 House & Home stores and 454 OK Furniture stores, of which 67 are in seven other African countries.
It was a solid performance in a sector which is far from enjoying boom conditions. Reflecting this, Statistics SA reports that in the three months to November furniture and appliance sales in current money terms fell by 0.3% year-on-year. In the previous three months, sales in current money terms were down 3.4%.
In 2016 Shoprite’s defensive quality again caught the attention of the market which, in the two previous years, had dished out harsh punishment to its share price. It resulted in Shoprite becoming one of the top five best-performing retail shares in 2016.
The market’s renewed confidence in Shoprite was also rewarded by a 12.7% rise in its headline EPS (HEPS) in the year to June.
A similar annual HEPS growth pace of 11%-13% appears well within Shoprite’s reach in its financial years to June 2017 and 2018. In its current financial year it would put Shoprite on a forward p:e of about 17.7, a level offering fair rather than great value.
However, putting a fair value on Shoprite, led since January by new CEO Pieter Engelbrecht, is no easy task. It has become more a matter of speculation following the announcement on December 14 of the intention to form a new entity, Retail Africa, through the merger of Shoprite and Steinhoff’s operations in SA and the rest of Africa.
All that is known so far is that to create Retail Africa, Shoprite will issue new ordinary shares to Steinhoff in exchange for “a significant equity interest” in Shoprite.
While the market has given news of the proposed creation of Retail Africa a lukewarm reception, Vianello believes it will go ahead. “It will be a complex deal but nothing is insurmountable,” he says.
South African retail giants Steinhoff International and supermarket group Shoprite Holding Wednesday said they were in talks to merge their African operations to form a single company worth over $14 billion.
The companies said in a statement they had initiated talks “regarding the potential combination of their respective African retail businesses” with an objective of creating what could be regarded as “the retail champion of Africa”.
The new venture to be called Retail Africa would have annual revenues of about 200 billion rand ($14.6 billion).
The companies said the proposition of this “formidable entity” was supported by their shareholders.
Shoprite is Africa’s largest food retailer with a presence in 14 African countries, including Nigeria, Africa’s largest economy, oil-producing Angola and Zambia.
It is said that the new venture would employ nearly 186,000 people and would give Steinhoff “African exposure”.
Steinhoff’s African businesses include a range of credit-based household goods and the company has vast interests in Europe.
The company recently bought UK discount chain Poundland and US retailer Mattress Firm Holding.
According to the companies, the proposed retailer is geared to become a leading discount retailer for value conscious African consumers.
They stated that Retail Africa would have “the required size and scale to compete with any other international retailer” and lead to job creation in various countries.
Woolworths’ shareholders latched on to two of the most controversial issues in corporate governance when substantial numbers voted against the reappointment of the auditors and also against the remuneration policy at Wednesday’s annual general meeting.
In a move that suggests shareholders are becoming more engaged on the matter, 18.6% of shareholders at the Woolworths AGM voted against the reappointment of EY as the group’s auditors.
Woolworths was one of the companies highlighted in the recent report by the Independent Regulatory Board for Auditors (Irba) addressing the need for auditor rotation. According to the report, EY has been auditing Woolworths for 84 years.
The regulator is calling for change and has recommended mandatory rotation of audit firms every 10 years.
The reappointment of auditors happens through an ordinary resolution requiring support from at least 50% of shareholders — the 18.6% is far off achieving any change. But it marks a significant departure from previous years when the resolution was guaranteed support from 99% of shareholders.
Irba CEO Bernard Agulhas said on Thursday the greater public discussion around auditor rotation has raised awareness around independence of auditors “and will go a long way in ensuring that auditor independence is strengthened”.
EY is one of the big four global audit firms which together audit 95% of the world’s 500 largest companies. The others are PwC, Deloitte, and KPMG.
The Irba, which revealed that EY audits 14% of JSE-listed companies, is concerned about a perceived lack of independence. It found that with 25% of listed companies the chairmen of the audit committees had previously worked for the external auditors. At Woolworths, only one of the board members had had a relationship with EY. Zarina Bassa, who is a member of the audit committee, was a partner at EY up to 2002.
On the remuneration front, a hefty 30.1% of shareholders voted against the remuneration policy. This is a record level of opposition from Woolworths’ shareholders and reflects concerns about the steady upward movement in executive remuneration at a time when the share price performance has been weak.
For financial 2016, CEO Ian Moir received total remuneration of R53.7m, up from R49.2m in 2015. The share price has been on a downward trajectory for most of 2016 and is at levels last seen in early 2014.
The remuneration levels also look inappropriately generous in the context of the grim trading update released recently. It showed that no section of the group — food, clothing, Australia, SA — had escaped the effects of the weak trading conditions.
Following the update, few shareholders are expecting to see any real growth in sales or earnings in the interim period.
The weak performance of the Australian operation was particularly disappointing given the steep price paid for it just two years ago.
At Woolworths’ 2013 AGM the remuneration policy got a 25.8% negative vote. In the following two years support surged to more than 90%.
The remuneration vote is nonbinding, but this year’s result could see Woolworths formally engaging with its shareholders to determine the reasons for their dissent and then disclosing details of that engagement.
Such dialogue is a requirement of King IV, which states if 25% or more of shareholders vote against remuneration policy an engagement process must be undertaken.
South African pharmacy chain Dis-Chem to double in size by 2022November 22, 2016 Written by Georgina Caldwell
South African pharmacy chain Dis-Chem to double in size by 2022
Dis-Chem has vowed to double in size over the next five years, according to a report published by Yahoo.
Ivan Saltzman, CEO of the South African drug-store chain, announced the ambitious growth plans as the retailer made its debut on the Johannesburg Bourse on Friday.
Dis-Chem plans to expand its store network to 200 outlets, double the 106 retail units it currently operates across the country.
“We will continue on the same trajectory… we’ve doubled since 2010 and we will double again in the next five years,” said Salzman.
CEO says tough conditions to continue.
JOHANNESBURG – South African no-frills retailer Mr Price said on Monday it expected low sales for the rest of the financial year after reporting its first decline in profit in 15 years, sending its shares to a three-year low.
Sluggish economic growth in South Africa, seen at less than 1% this year, coupled with rising interest rates and inflation and a warmer than expected winter have forced clothing retailers to cut prices and clear stock, hurting Mr Price’s sales.
It followed fancier rival Woolworths Holdings, which reported slower sales growth last week and said markdowns by other clothing retailers had affected sales.
Mr Price said consumers are under “considerable pressure” and have diverted spending away from clothing to food and other essentials.
“We expect trading conditions to remain difficult in the second half with no relief in sight for the embattled consumer,” Chief Executive Stuart Bird said.
Mr Price’s shares fell more than 2% after the company reported a 13.7% decline in half-year profit.
Diluted headline earnings per share fell to 351.2 cents for the six months to end-September, versus 406.8 cents in the corresponding period last year.
The retailer, which also sells furniture and homeware to thrifty shoppers, cut its interim dividend by 8 percent to 228.2 cents per share, from 248 cents in the same period last year. The dividend a year ago was up 17.3% from the first half of 2014.
Headline EPS is the main profit measure in South Africa and strips out certain one-off items.
Revenue form the company’s apparel division, which accounts for 60% of its sales, fell 0.5% from a year earlier.
The retail sector is feeling the squeeze as interest rates in South Africa have risen by 200 basis points since early 2014 to contain rising inflation, hurting consumers’ spending power.
“The weakness has pretty much been consistent among all retailers,” said SBG Securities retail analyst Kaeleen Brown.
High food inflation had gnawed at consumers’ disposable income and retailers’ profits were also being hit as rivals cut prices to get rid of their old stock, Brown said.
Shares in Mr Price, which have halved since August, were down 2.4% at R130.48 by 1159 GMT, bucking a slight rise in Johannesburg’s All-share index.
South African retail stocks slumped, heading for the lowest in almost seven months, after Woolworths Holdings Ltd. said clothing sales fell, adding to similar recent declines reported by local competitors.
The eleven-member FTSE/JSE Africa General Retailers Index retreated 4.1 percent in Johannesburg, heading for the lowest level since April 24. Cape Town-based Woolworths tumbled 3.7 percent to 67.68 rand by 2:55 p.m. in Johannesburg, the lowest for more than two years and extending the decline by the owner of Australia’s David Jones department stores to 33 percent in 2016.
“As inflation rises, we are seeing South African retail coming to a grinding halt,” Alec Abraham, equity analyst at Sasfin Securities, said by phone from Johannesburg. “Even the wealthier consumers are now feeling it.”
Discretionary spending is under pressure from an unemployment level of 27 percent, the slowest economic growth since 2009 and rising interest rates. Inflation has been above 6 percent most of this year. Comparable sales fell at Woolworths’ South African clothing and general merchandise unit, as well as at its Australian Country Road business. Trading has been difficult in both countries, it said in a statement Friday.
Mr Price Group Ltd. led the decline among retailers, falling 7.5 percent. The clothing and household-goods company warned two months ago that first-half earnings would probably decline as it experienced the weakest winter season in more than a decade. Mr Price’s stock has slumped 39 percent since that announcement. It’s expected to report earnings on Nov. 14.
The drop in the general retail index was followed by a decline in the FTSE/JSE Africa Food & Drug Retailers Index, which fell as much as 2.2 percent, led by Pick n Pay Stores Ltd.’s 5.8 percent drop.
Back in September 2015, Memeburn reported that ecommerce platform Groupon began shedding global offices in an effort to “make the business more efficient”. And while South Africa wasn’t a country affected back then, it is now.
Groupon South Africa is dead: here’s what will happen to your orders
Groupon South Africa today announced that it will shutter its operations in the country, in a bid to further streamline its global business operations.
Groupon launched in South Africa in 2010 after it bought local startup Twangoo.
Groupon South Africa will effectively shutter on 30 November
“We are sorry to inform you that as of 4 November 2016, Groupon has wound down its operations in South Africa and we are unable to offer you any deals today,” the company states on its website.
“For our customers, this means we will stop offering deals on our website from tonight. All current vouchers bought will remain valid until the date stated on the voucher. The terms and conditions on the voucher remain the same.”
South Africa is one of 12 countries getting the axe, as Groupon begins to focus on 15 nations earmarked as its “go-forward country footprint”.
The fashion retailer cites an increasingly tough retail market.
Investors gave the shares of Truworths International a dressing down on Thursday as they fretted about the fashion retailer’s bearish sales update showing that it’s feeling the pinch from South Africa’s tough retail landscape.
Truworths’ share price dived by 7.8% during morning trade after it said that sales for its first 18 weeks to October 30 declined by 1% to R4.4 billion compared with growth of 16% last year.
These estimates exclude its UK fashion footwear chain Office Retail Group, which Truworths acquired in 2015 for £256 million – marking its foray into the region.
The pressure point for the retail is on its like-for-like sales which decreased by 5%.
Fashion retailers have been on the back foot as there are few signs that there will be a revival spending by hard-pressed consumers. The sustained rise in inflation, interest rates and living costs, is leaving little room for non-essential and discretionary-like purchases (including apparel), prompting consumers to prioritise the spend on food.
Factoring in sales from the Office business, Truworths’ group sales grew by 39% to R6.2 billion – indicative of its UK business being a boon for the retailer.
Office recorded retail sales for the period under review of £97.3 million (R1.8 billion in rand terms), up 1.4% relative to the prior period’s £95.9 million.
Truworths, traditionally a credit-based retailer, saw its credit sales decrease by 1% and cash sales grew by 130%. Credit sales comprised 49% of Truworths’ retail sales and 70% excluding its Office business.
Truworths’ credit sales have been under pressure since it began to implement the National Credit Regulator’s (NCR) new affordability assessments in 2015 – intended to manage the risk of issuing credit to ensure that consumers are not over-indebted through unaffordable credit agreements.
The NCR deems the regulations as necessary to ensure that reckless lending is avoided while Truworths, Mr Price and The Foschini Group (TFG) have deemed them onerous.
One of the ways of appealing to a broad range of consumers with different affordability profiles is to contain selling price inflation. Truworths’ product inflation averaged 16%. Other fashion retailers such as Woolworths, Mr Price and TFG have kept their inflation below 10% to grow their market share and get shoppers into their stores.
Truworths – with brands such as LTD, Daniel Hechter, The Young Designers Emporium, Inwear, Identity and others – has been widely criticised for its narrow pricing methods and having limited options for consumers wanting cheaper apparel. This while its competitors such as Mr Price, Woolworths, TFG – and international retailers Cotton On, Zara and recently H&M – have been aggressive in their wide price offerings and discounting their merchandise during the recent winter season.
Truworths’ results for the 26-weeks to December 2016 will be released in February 2017.
South African malls
In the world of South African retail property development, new construction has slowed down and there’s the perception of oversupply, but some of Gauteng’s biggest malls are getting bigger, SA Commercial Property News reported.
There’s appetite for regional and super-regional malls, which enjoyed low vacancy rates in 2016 — 3 percent and 2 percent respectively — painting a positive picture of the economy.
Johannesburg’s office market is a different story with slow growth in rental rates. Vacancies increased from 11.3 percent in the third quarter of 2015 to 11.8 percent in Q3 2016.
The industrial property market is dominated by transport and logistics service providers.
“South African commercial property continues to present attractive investment opportunities to discerning investors, despite challenging economic conditions,” said said Robert Shaff of Nexus Property Group, in a Biz Community interview. “Evidence of this lies in the strong performance of the South African listed property industry, having risen nearly 9 percent over the first nine months of this year – close to double what equities have achieved.”
Jeffrey Wapnick is managing director of Octodec, a real estate investment trust (REIT) that claims to be one of the largest owners of property in the Tshwane and Johannesburg central business disctricts.
“There is a positive momentum in the CBDs with demand for quality residential and retail space expected to remain solid even in challenging economic conditions,” Wapnick said, according to SACommercialPropNews. “South Africa is facing economic challenges but we are seeing significant private and public investment projects accelerating in the Tshwane and Johannesburg CBDs. This is highlighted by the increasing demand from national retailers recognising our CBD nodes as prime locations for stores roll-out.”
For the year ending in September 2016, South African REITs provided a solid performance for investors, EProp reported. They delivered total returns of 12.3 percent compared with South African shares at 4.8 percent, South African bonds at 15 percent and cash at 5.4 percent.
Shoprite Founder Basson to Step Down After 37 Years at HelmPosted by Janice Kew
Company veteran Engelbrecht to take over as CEO from Jan. 1
New leader must overcome weak domestic consumer confidence
Shoprite Holdings Ltd. said founder Whitey Basson will retire as chief executive officer, ending a 37-year tenure that saw the South African company grow to become the continent’s biggest food retailer.
Basson, who turns 71 in January, will step down at the end of December and be succeeded by Pieter Engelbrecht, the company’s 47-year-old chief operations officer, Cape Town-based Shoprite said in a statement on Monday. Engelbrecht, who has been with the company for more than two decades, will take over as CEO from Jan. 1.
Whitey Basson Photographer: Robert Tshabalala/Financial Mail/Gallo Images/Getty Images
“I am tired — the business is now so large and there are so many issues that take up too much time,” Basson told reporters at the company’s annual shareholder meeting in Cape Town. “Pieter is a very driven guy. I’d say about 50 percent of the operating issues he’s already taken over. So it’s not a new job for him.”
Basson has led Shoprite since forming the company in 1979. He expanded the retailer from an eight-store chain to Africa’s industry leader with a market value of 115 billion rand ($8.4 billion) and more than 140,000 workers. To build on that, Engelbrecht will need to overcome weak domestic consumer confidence and is likely to take the company beyond Africa.
“Whitey has turned 70, so I think it was imminent,” Evan Walker, a money manager at 36One Asset Management, said by phone from Johannesburg. The incoming CEO “has been very instrumental in a lot of aspects of growth in that business, so I think he is a very highly regarded successor.”
Shoprite shares rose 4.2 percent to a two-month high in Johannesburg after the company also said sales gained 16 percent in the three months through September. Revenue at the South African stores increased 12 percent as promotions helped offset the impact on customers of high unemployment and inflation.
Pieter Engelbrecht Source: Shoprite Holdings Ltd.
Basson began his career by working as an accountant in the early 1970s, then entered the retail industry as a financial manager of the Pep Stores chain. He formed Shoprite by acquiring a small Western Cape grocery business and began building the company through store openings and acquisitions.
Inspired by low-cost European discounters such as Aldi, Basson focused on the middle-to-lower income market, the biggest in South Africa, while acquiring and reviving larger, unprofitable supermarket chains such as Checkers and OK Bazaars. Shoprite opened its first store outside its home market in Zambia in 1995.
Basson said recently that the company will consider expanding outside Africa, following in the footsteps of fellow South African retailer Steinhoff International Holdings NV, which has transferred its primary listing to Frankfurt and made bids for companies in France, the U.K. and the U.S. Shoprite has stores in 15 African countries. He will remain as a non-executive vice chairman to ensure an orderly leadership transition, the company said.
“The company has become very large and is at a crossroads,” Chairman Christo Wiese, who is also South Africa’s richest man and Shoprite’s largest shareholder, told investors at the annual meeting. “Over the next few years it will have to globalize. We will continue to keep an eye on opportunities.”
The succession comes only a month after Shoprite said it doubled the CEO’s pay to 100.1 million rand in its last fiscal year, thanks to a 50 million rand bonus for beating a profit-growth target. Almost 30 percent of votes at the AGM were cast against the remuneration policy, in line with the previous year, when the Public Investment Corp. was among those who didn’t support the CEO’s pay deal. The state-owned PIC is Shoprite’s biggest investor with an 9.8 percent stake, according to data compiled by Bloomberg.
Cape Union Mart Group says it has acquired Keedo, a South African designer and manufacturer of quality children’s clothing.
Keedo adds 25 stores and a factory to Cape Union Mart Group’s retail footprint of nearly 220 stores and their K-Way factory. The group now provides employment to approximately 3,000 people.
While Keedo will be wholly owned by Cape Union Mart Group, the fourth generation family business privately owned by the Krawitz family, the chain will continue to operate independently under the stewardship of Nelia Annandale.
The Cape Union Mart Group currently comprises four national retail chains. Cape Union Mart, is South Africa’s leading retailer of outdoor equipment and apparel. Poetry, focusses on clothing, homeware and eclectic gifts for the modern woman. Old Khaki is aimed at casual wear for trendy young men and women.
Tread & Miller is the Group’s youngest chain, focussing on urban footwear. The first Tread & Miller store opened a year ago and has already grown into a 20 strong chain.
Johannesburg – The R2.5 billion invested in the expansion of the Menlyn Park Shopping Mall by majority owner Pareto is expected to result in a further R5bn being invested in shop fittings and other activities, as well as thousands of new permanent job opportunities.
Marius Muller, the chief executive Pareto Asset Management, said the rule of thumb was that six jobs were created for every 100 square metres that was built during the construction phase and another six permanent jobs per 100m² when construction was completed.
“We are talking about creating 3 300 permanent jobs in this node,” he said on Friday at a briefing to mark less than 60 days to the official launch of the expanded centre on November 24.
Malose Kekana, the group chief executive of Pareto, said the redevelopment of Menlyn Park Shopping Centre was driven by a strong demand from retailers because they were enjoying robust trade results year on year.
Kekana said the crown jewel of the refurbished mall was Central Park, an open air piazza that would be flanked by restaurants.
Menlyn Park Shopping Centre has since last year been wholly-owned by Pareto, which is 76 percent owned by the Government Employees Pension Fund. This follows Pareto, which owned half of the super regional mall, taking transfer of the remaining 50 percent stake from Old Mutual Life Assurance.
This was in line with an asset swop transaction that resulted in Old Mutual gaining outright ownership of Cavendish Square in Cape Town, which was previously half owned by Pareto.
The Menlyn Park expansion and refurbishment project will add 50 000m² of retail floor space to increase the total lettable floor space to 180 000m², with the number of stores in the centre rocketing from about 300 to more than 500, as well as 8 250 parking bays.
Muller said Menlyn Park Shopping Centre would be 50 000m² bigger than the Mall of Africa at Waterfall in Midrand, and was the first mega mall on the African continent.
He said people questioned why Pareto was building such a large mall when there were so many other malls, but he stressed that the expansion was tenant driven.
Muller said they had extensive discussions to understand retail demand, retailer success and, more importantly, retailer failure.
“We offer retailers success. If the store is not large enough to carry all the brands, carry all the colours and all the sizes, you become a secondary location and then start losing sales.
“We are not big supporters of cannibalisation. We are better supporters of successful, robust, long-term investment that will stand the test of time,” he said.
Olive Ndebele, the general manager of the centre, said size did matter, but variety was more important. “We are expecting about 2 million feet a month. We are currently on an average of 1.6 million feet a month,” she said.
Muller said questions were also asked about when Pareto would invest in Menlyn when it had investments elsewhere in the country.
He said Menlyn was the fastest growing node in South Africa in terms of new businesses coming into the node and the residential area being developed around the node.
“That is the most important contributor to having a successful long-term investment, because you have a captive market because of the offices and a loyal support base through the residents… and they are from a high living standards measure group as well,” he said.
Starbucks opens its third South African store in Menlyn Maine in the city of Tshwane
Starbucks opens its third South African store in Menlyn Maine in the city of Tshwane
Johannesburg, South Africa, 2016-Sep-22 — /EPR Retail News/ — In partnership with Taste Holdings, Starbucks has opened its third South African store in Menlyn Maine in the city of Tshwane. Once the mall is complete in 2017, Menlyn Maine will be the biggest green development in South Africa, and the new epicenter of the city. Beginning today (September 21, 2016), Tshwane residents have their own place to enjoy Starbucks 100% arabica coffee, fresh food offerings and free high-speed Wi-Fi in a beautiful new store.
“We are honored to open our doors in a city with such a rich culture and appreciation for food. Just like in our first two Starbucks stores, we hope our customers will consider this new store as a ‘third place’ between home and work, where people connect, share and create. It is a place where ideas are born and memories are created – it’s about so much more than a cup of coffee,” said Carlo Gonzaga, CEO of Taste Holdings.
The store’s design was inspired by the cityscape of Tshwane. Strong geometric lines of the buildings and the city’s warm tones had an influence on the store’s aesthetic. The natural, scored concrete walls celebrate the hard work and craft of the city. The highlight of the store is a hand-painted mural by Seven Veil Studios that pays homage to the very first Starbucks store in Seattle’s Pike Place Market, while celebrating South Africa through the local flora.
“Every aspect of this store has been created to be the ultimate ‘third place.’ We hope that this store will become a part of the city and our history,” said Gonzaga.
Starbucks Reserve™ Bar offers special small-batch single origin coffees served by skilled baristas through a variety of brewing methods, including Siphon, Pour-Over, and the Clover™ brewing system. Customers can enjoy Reserve coffees from Colombia San Fermin, Colombia Los Rosales, and Cape Verde Figo Island.
“With our first two South African stores open and doing well in Johannesburg, I am delighted to see a new store open in Pretoria,” said Martin Brok, president, Starbucks Europe, Middle East and Africa. “Our whole business is excited about being part of these South Africa neighborhoods and I’m proud that this store will extend the Changing Lanes program even further. We’ll now be able to offer great career opportunities to local young people in Pretoria, including training in world class customer service and barista mastery.”
The store team of 30 partners has been recruited from the surrounding communities through Taste’s Changing Lanes program, which focuses on giving opportunities to currently unemployed youth.
About Taste Holdings
Taste Holdings is a South African-based management group and a leading licensor of global brands in the Southern Africa region. It owns and licenses a portfolio of franchised and owned category specialists, Quick Service Restaurants (QSR) and retail brands currently represented in five countries in Southern Africa. Its food division has a 30-year master license agreement for Domino’s Pizza in Southern Africa. It also owns, operates and franchises Zebro’s Chicken, The Fish & Chip Co., Maxi’s Restaurants, Scooters Pizza and St Elmo’s Woodfired Pizza. Its luxury goods division is underpinned by three owned retail brands – NWJ, Arthur Kaplan and World’s Finest Watches. NWJ is the third largest national jewelry chain by store numbers in the region. Arthur Kaplan and World’s Finest Watches are, together, the leading retailers of luxury Swiss watch brands in the region. Taste is listed on the Johannesburg Stock Exchange (JSE) under the symbol “TAS.” http://www.tasteholdings.co.za.
Since 1971, Starbucks Coffee Company has been committed to ethically sourcing and roasting high-quality arabica coffee. Today, with more than 24,000 stores around the globe, Starbucks is the premier roaster and retailer of specialty coffee in the world. Through our unwavering commitment to excellence and our guiding principles, we bring the unique Starbucks Experience to life for every customer through every cup. To share in the experience, please visit our stores or online at news.starbucks.com and Starbucks.com.
The R1 billion Thavhani Mall in Thohoyandou, Limpopo will open its doors next year.The R1 billion Thavhani Mall in Thohoyandou, Limpopo will open its doors next year.
The rapidly growing Thohoyandou town in Limpopo province is set for a major boost when the R1 billion Thavhani Mall opens its doors on 24 August next year.
The on-going shopping mall developments and others that are still in the planning phase in South Africa, is increasingly driving concerns about an oversaturated retail property market despite consumer spending being in the doldrums.
However, still, some property punters believe the market can take it.
Local businessman, Khosi Ramovha of Thavhani Property Investments, first envisaged a regional mall in the area seven years ago. He brought on board pre-eminent South African shopping centre developers and investors, Flanagan & Gerard Property Development and Investment, to help realise this vision.
Thavhani mall will be the largest shopping centre in Thohoyandou as well as the greater Thulamela Municipality.
The 50,000m2 regional shopping centre is owned and developed by Thavhani Property Investments. The mall is the anchor and catalyst of the mixed-use urban precinct development, Thavhani City, which is being developed on a 27ha site in Thohoyandou.
Thavhani City is a shared vision between Thavhani Property Investments and the Thulamela Local Municipality. It will also include the Thavhani Office Park, a motor-city and private healthcare facilities. The precinct currently includes a library, community centre, information centre, and the 40,000-capacity Thohoyandou Stadium.
Last year, JSE-listed real estate investment trust Vukile Property Fund secured a one-third stake in the mall. The stake will transfer to Vukile upon completion of the mall.
Ramovha says: “The centre is stimulating the local economy. In addition, it will enhance the lifestyle and urban fabric of region. The mall is already creating jobs while it is under construction and, upon opening next year, will introduce hundreds of new full-time jobs. And, importantly, sourcing labour from the local community has been prioritised.”
The Mall is at the heart of the growing regional economic hub of Thohoyandou, making it easy to access. It has excellent proximity to its existing CBD and major regional roads. The mall is located on the R524, which links Louis Trichardt to Punda Maria and is adjacent to the primary crossroad with the major north road to Sibasa and south to Giyani.
Paul Gerard, Managing Director of Flanagan & Gerard Property Development and Investment, a shareholder in Thavhani Property Investments, says: “We are excited that, by this time next year, the mall will be ready to make history by opening its doors to the community and its neighbours, offering them the biggest selection of shopping and leisure retail in the region.”
The mall will boast over 134 shops, a number of restaurants, and service outlets. it will also introduce many new retail brands to the region, including HiFi Corp, Spur, Panarottis, Pep Home, Green Cross, Jam Clothing, Torga Optical, Donna Claire, Queenspark, Mr Price Home and Bogart Man.
It will be anchored by Woolworths, Edgars, Pick ‘n Pay and Superspar.
The tenant list that has secured their footprint in the double-level mall include Truworths, Foschini, Markham, Spitz, Mr Price, Pep, Ackermans, Jet, Standard Bank, Nedbank, Capitec, Shoe City, Miladys, Legit, Clicks, Link, Roots, Studio 88, Exact, Cross Trainer, John Craig, Totalsports and Sportscene.
Thohoyandou is a town in the Limpopo Province. It is the administrative centre of Vhembe District Municipality and Thulamela Local Municipality. It is also known for being the former capital of the bantustan of Venda.
Mr Price Group Ltd. plunged the most in more than seven months after the South African clothing and household-goods retailer said first-half earnings would probably decline after its most challenging winter in more than a decade.The shares dropped 16 percent to 184.47 rand at the close in Johannesburg, the biggest decline since Jan. 15. Almost 6.4 million shares traded, or 4.8 times the three-month daily average.
“Unseasonally warm weather at the start of winter and higher prices from the weaker rand inhibited sales,” the Durban-based company said in a statement on Wednesday. “There has also been a fundamental shift in consumer spending in South Africa, with higher unemployment and low economic growth significantly dampening consumer confidence and spending.”
It’s unlikely that earnings for the six months through September will exceed the previous year, the company said. The clothing business was particularly hard hit after competitors placed heavy discounts on winter garments and Mr Price probably moved too slowly to mark down its own goods, it added. Woolworths Holdings Ltd., a South African food and clothing retailer that targets higher-income customers than Mr Price, said last week clothing sales had suffered from what Chief Executive Officer Ian Moir called a “horrible, non-existent winter.”
Shares in other South African clothing retailers fell alongside Mr Price. The Foschini Group Ltd. slumped 7.8 percent to 130.71 rand, the steepest drop since June 27. Truworths International Ltd. declined 3.9 percent to 76.15 rand, the lowest closing price since January, 2015.
Mr Price sales for the first 18 weeks of the financial year rose 2.3 percent, including a 30 percent increase in what the company categorizes as other income, mainly from financial services and cellular operations, the company said. Retail sales rose 1 percent.
“The numbers were very, very bad,” Alec Abraham, senior equity analyst at Sasfin Securities, said by phone from Johannesburg. “As far as I can tell their volumes were hit quite significantly.”
Mr Price last year reported net income of 1.08 billion rand ($73.7 million) in the six months through Sept. 26, with sales increasing 9 percent, compared with 15 percent the previous year. The company attributed the slower growth at the time to muted consumer spending and “some poor fashion choices.”
“While the length and depth of the current downturn is at present unclear, the company has successfully negotiated previous negative cycles,” Mr Price said on Wednesday. “The group is responding to the changing economic and competitive environment by focusing on delivering merchandise at exceptional value.”
Ted Baker has announced the opening of its first store in South Africa within Sandton City, Johannesburg. The store, which draws inspiration from Johannesburg’s famous Shakespeare garden, has a stylish setting, showing off a beautiful Elizabethan wooden framed front and antique oak floor. The new Ted Baker store which covers 1960 sqft features the latest collections of menswear, womenswear and accessories.
Conservatory style panelled walls with lush green plants behind the arches act as a hiding place for famous Shakespearean symbols and artefacts. The skull from ‘Hamlet’ and the scales from ‘The Merchant of Venice’ are just a few of the treasures that can be found. Sumptuous, heavy velvet fabrics and drapes fall from the ceiling, softening the interior. Neon quotes on the wall mark the menswear and womenswear shopping area: “The soul of the man is his clothes” and, “And though she be but little, she is fierce” – A Midsummer Night’s Dream.
Shoprite profit rises 17% amid tough retail conditions
Cape Town – Shoprite’s full-year profit rose to 17% due to its focus on giving the lowest prices while also subsidising the price of basic foodstuffs.
Diluted headline earnings per share rose from R7.69 to R9 in the 12 months through June, which was higher than the R8.66 average that 13 analyst estimates told Bloomberg.
Trading profit was up 15% to R7.278bn, while turnover increased 14.4% to R130bn. Shoprite was trading 1.5% lower at R198.98 at 08:20 on Tuesday.
It will pay a dividend of R2.96, up from R2.43, per ordinary share. “This brings the total dividend for the year to 452 cents (2015: 386 cents) per ordinary share,” Shoprite said in a statement on Tuesday.
Shoprite CEO Whitey Basson said on Tuesday that the growing trust placed in the company by their customers was gratifying, “with the latest AMPS figures showing that 76% of the adult South African population shop at one of our supermarket brands – up from 72% a year ago”.
“There are many factors which contributed to the results we have achieved, but crucial amongst them has been an unwavering focus on ensuring the lowest prices while also subsidising the price of basic foodstuffs wherever possible,” he said in a statement.
“Rigorous cost control and more effective operating methods have enabled us to achieve this without compromising our trading profit margin which remained at 5.6%.”
“Despite intense local competition, we managed to keep market share above 30%. In June market share increased to the highest level in three years.”
“The level of efficiency with which we managed our business is also reflected in our internal food inflation.”
“Based on a monthly measurement of 81 000 product lines, it averaged just 3.5% for the period, well below South Africa’s official rate of food inflation according to Statistics SA of 7.2% for the same period,” he said.
Shoprite said the last year was a difficult period economically not only for South Africa, but also for the African continent and the world at large.
“The cost of living was compounded by the worst drought in 35 years, which has severely impacted prices of basic agricultural products,” the firm said. “As a result, the disposable income of especially lower-income consumers has come under increasing pressure.”
“This drought has had an equally debilitating effect on the economies of those countries in Southern Africa where we do business, while growth in West-African countries such as Angola and Nigeria has been stifled by the continued low price of oil on world markets and a severe lack of foreign currency.
“The strongest performance was delivered by the African division with impressive turnover and profit growth despite severe trading restrictions in some of its markets.”
Shoprite said the focus has been on becoming even more customer-centric. “Fulfilling shoppers’ basic requirements, so that they always find the products they want at competitive prices, has major implications for the way we run our business and for our relationship with customers.”
“To meet the challenge of having preferred products on the shelf in time, the group has continued to expand and refine its supply-line infrastructure in close cooperation with suppliers. At the same time staff training programmes have been greatly expanded to increase skills and build a more service- orientated culture,” it said.From Fin24
“We are completely humbled by the support we have received since opening our first store in April. This new development gives us an opportunity to bring our iconic coffee to an iconic city with a rich food and coffee culture. We are honoured and excited to bring the Starbucks experience to ‘Jacaranda City’,” says Carlo Gonzaga, CEO of Taste Holdings.
The 250sqm store at Menlyn Maine in Pretoria will offer the full Starbucks experience including 100% Arabica coffee, a fresh, delicious food selection and free, high-speed Wi-Fi. The new store will also offer a Reserve Bar that will serve some of the world’s rarest single-origin, small-lot coffees and prepared through a variety of unique brewing methods, including siphon, pour-over, and the Clover™ brewing system.
“Starbucks is known as the ‘third place’, a place away from home and work where people connect, share and create. Every aspect of this store has been created to be the ultimate ‘third place’ in Pretoria,” adds Gonzaga. As with all Starbucks stores, individuality is important and the store design is inspired by Pretoria’s community and surroundings. As with the first two stores, local artisans will contribute to the design, and décor for the store.
Store partners have been recruited from the surrounding communities through Taste’s Changing Lanes programme, which focuses on giving opportunities to currently unemployed youth.
“We selected Menlyn Maine not just because of its location but because it offers consumers something new,” concludes Gonzaga. Menlyn Maine is set to become Africa’s biggest green city with over 30 000sqm of space and is due to open late September.
Greenpeace SA has accused retail giant Pick and Pay of failing to comply with its clean energy programme launched three months ago.
The programme calls on businesses to commit to 100% renewable energy and stop using fossil fuels.
Activists have staged a protest outside the company’s headquarters in Cape Town.
Greenpeace says Pick ‘n Pay has the highest electricity consumption of all retailers in the country.
As part of their protest against the retail giant, activists delivered a solar ring outside the company’s headquarters.
Its crown is made of solar panels. They say it symbolises what they hope will be a lasting bond between the chain store and solar power.
“We’ve been trying to engage with Pick ‘n Pay but we haven’t seen any changes. We’ve had meetings and nice exchange of words but aren’t showing the kind of commitment to renewable energy that we would really like to see. We are proposing to them that they make a firm commitment to the son and that they commit to a renewable future for their brand,” says activist, Penny-Jane Cooke.
Cooke says the retailer has an ethical obligation towards its millions of supporters that they care about the environment. She says if Pick ‘n Pay takes their suggestions on board, they could save enough energy to power 65 000 homes.
“We are saying you need to find out how quickly your business can go renewable, and then commit to that and talk about it publicly. You have to have a plan both short and long term as to how you’ll achieve that. So it’s about making your business as efficient as possible. South Africa has been a really energy intensive country in the past – which means that business can make a lot of savings in the future and they need to be really ambitious about those energy savings, and finally what is important for South Africa is lobbying for renewable energy,” says Cooke.
Greenpeace says converting to solar energy will also create thousands of the much needed jobs in the country.
Pick ‘n Pay spokesperson Izak Joubert, says they are committed to further talks with Greenpeace.
JOHANNESBURG/LONDON: South Africa’s Steinhoff International Holdings NV has bought 23% of Poundland Group Plc and is considering a full cash bid for the British no-frills homeware chain in its latest attempt to expand in Europe.
Steinhoff, a $22 billion furniture conglomerate which has lost out in two high profile takeover battles already this year, said on Wednesday that it had acquired 22.78% of Poundland, which sells every item at a single price point of £1.
Under British takeover rules, Steinhoff has until July 13 to announce a firm intention to bid for all of Poundland, whose main shareholder had been private equity firm Warburg Pincus LLC, which said on Tuesday it had sold down its 15% stake.
Steinhoff, which has lost out to rivals in two battles for Britain’s Home Retail Group Plc and France’s Darty Plc in the last three months, bought just over £61.2 million Poundland shares, which would be worth around £120 million at the closing price. Poundland has a market capitalisation of around £537 million ($761 million).
Poundland shares closed up 2.2% higher at 200 pence on Wednesday, after rising around 25% on Tuesday.
News of the South African company’s latest move raised questions about its approach to expansion in Europe, where it already runs chains such as white goods retailer Conforama in France and furniture chain Harveys in Britain.
“There’s seem to be no obvious strategic fit but it might just be a matter of adding discounted chains to its stable because that’s essentially what they are: a discount retailer,” said Vestact’s Sasha Naryshkine in Johannesburg.
South African retail mogul Christo Wiese, Steinhoff’s chairman and biggest shareholder, told Reuters he was interested in Poundland because it would be a “good fit” for Steinhoff, adding it had a disciplined approach to acquisitions.
Steinhoff, which sells beds and cupboards to lower-income shoppers in Europe, southern Africa and Asia, is keen to expand further in Europe, where pressure on consumer income has made German’s Aldi the continent’s fastest growing supermarket chain.
Poundland would give Steinhoff a company with more than 900 shops in Britain, Ireland and Spain but also one whose £1 billion annual sales have been under pressure.
Poundland’s 2015 purchase of rival 99p Stores for £55 million has raised questions over its price model.
“Although Steinhoff has a proven track record of integrating businesses and improving their margins over time, we would see this acquisition as higher than average risk given the increasingly crowded UK variety discount space,” said RBC Europe Ltd’s analyst Richard Chamberlain.
Poundland, which competes with B&M, Home Bargains and Wilko and Bargain Buys, told shareholders to take no action, noting that there was no certainty an offer would be made.
TFG has set itself stiff targets for growth in the five years to March 2021. The retailer is looking to increase sales by 85% to R39bn, to lift operating margin from 17% to as high as 19% and return on equity from 23.9% to 28%-30%.
If TFG achieves its 2021 sales target and a margin of 18% it implies an average annual 14.4% rise in operating profit to just short of double its level in the year to March 2016.
“Barring an economic calamity we view our targets as very attainable,” says TFG financial director Anthony Thunstrom. “They are derived from projections made by each brand and are probably conservative. Targets set over the past eight years have all been exceeded.”
TFG showed its form in its latest year, lifting headline EPS (HEPS) 17.6%. It put TFG marginally ahead of Mr Price, which reported a 17.1% HEPS rise over the same period.
For TFG, its past year was one of bedding down UK-based fashion retailer Phase 8 (acquired for £140m in January 2015).
“Integration is the make or break of an acquisition,” says Thunstrom. “Phase 8’s management has done everything we asked them to do. The integration could not have gone more smoothly.”
While Phase 8 contributed R3.6bn (17%) to group retail sales of R21.1bn, its contribution to HEPS growth was minimal.
“We expected to only break even in the first year,” says Thunstrom. “Phase 8 turned out to be mildly earnings accretive.”
TFG has big plans for Phase 8, which has 542 stores and concessions in department stores in 21 countries.
Targeted for 2021 are 820 outlets excluding those of Whistles, a UK-based high-end fashion retailer with 121 outlets, acquired by Phase 8 in March for £4.6m. Thunstrom sees Whistles as a brand with long legs.
“It is an aspirational brand with a far higher market profile in the UK than Phase 8,” he says. “Before we disclosed its purchase price many people thought we had paid R1bn. It shows how big its brand equity is.”
TFG intends running with that brand equity.
“We know all the department store groups and countries we can take Whistles into,” says Thunstrom.
Big growth plans are also in place in SA, where TFG wants to grow the 2,286-store footprint of its 20 brands to 3,090 by 2021.
Independent retail analyst Syd Vianello says: “They have too many brands to manage them all effectively.”
Thunstrom disagrees. “Our brand diversity gives us flexibility,” he says. “We can put as many as 15 brands into a mall and often do.”
It will, arguably, not be brand diversity that counts in a constrained SA market. It will be success in attracting cash customers at a time when the ability to extend credit has been curtailed by recently introduced affordability regulations.
“With reduced access to credit, consumers are turning to cash purchases and even lay-by,” says Thunstrom.
“Cash customers can spend anywhere they want to. It is all about gaining cash market share, which we are doing.”
In its latest financial year TFG upped SA cash sales by a hefty 18.4% to take them to 48.3% of total sales. TFG’s cash sales growth was double Mr Price’s 9.1% cash sales growth.
Truworths is also pushing cash sales. Excluding its recent UK acquisition, Office Retail, cash sales lifted by 16% in its half year to December. But they did so off a low base, cash sales remaining a modest 29% of total SA sales.
As matters stand TFG is something of an underdog, rated on a 13.9 p:e against Truworths’ 14.7 p:e and Mr Price’s generous 18.9 p:e. TFG’s management will be out to prove the market wrong. They stand a strong chance of doing just that.
RETAILER Clicks will takeover managing private hospital group Netcare’s 37 Medicross branded retail pharmacies and its 51 hospital “front shops”, the two JSE-listed groups said in a joint-statement on Wednesday.
The agreement excludes the dispensing of prescriptions in the Netcare Hospital pharmacies, which remain within Netcare’s hospital operations.
Specific employees involved in these areas of the business will be transferred to Clicks on terms similar to their current conditions of employment and any other employees indirectly affected will remain employed by Netcare on their current conditions of employment, the two groups said in the joint statement from the JSE-listed companies said.
“The rationale for the transaction is to offer an enhanced retail service offering to both patients and consumers by affiliating the pharmacy and the front shops to an experienced retail provider such as Clicks,” Netcare said.
The parties expected to conclude the deal on October 1. It needs to gain competition authority approval, but falls below the JSE’s threshold for categorised transaction.
“Requirements for Netcare and Clicks and will have no material impact on the earnings and financial positions of either Netcare or Clicks,” the groups said in the joint statement said.
Johannesburg – Mr Price said yesterday that its sales exceeded R20 billion and earnings exceeded R10 a share for the first time since the group’s inception.
Chief executive Stuart Bird said the figure represented an important milestone for the company.
“We are very satisfied with these results, particularly after considering the headwinds that we confronted in terms of the subdued economy, changes in credit legislation, challenges in key African economies and the high base in our main apparel division,” said Bird.
The group’s diluted headline earnings a share rose 17.1 percent to 1 012.9 cents in the year to April.
The group reported that total revenue had grown by 8.4 percent to R19.6bn, with retail sales increasing by 8 percent to R18.7bn.
Bird said operating profit in the South African market grew 20.8 percent to absorb the impact of underperforming and new businesses.
He said cash sales came in 9.2 percent higher, while credit growth of 2.3 percent was inhibited by the introduction of new credit regulations last September, which slowed new account growth.
The group declared a final gross cash dividend of 419c a share – a 13.7 percent increase compared with the last period but said the final dividend was lower than headline earnings growth due to the increase in the dividend payout ratio at the interim stage.
Profit from operating activities rose 17.1 percent to R3.6bn, up from R3.1bn, while profit attributable to equity holders of parent entity was 15.4 percent higher at R2.6bn.
It said retail selling price inflation was 7 percent and unit sales were up by 1 percent to 231.1 million.
Bird said the group opened 45 new stores during the period under review and expanded 26 others to grow its store space.
But he warned that the consumer environment would remain depressed in the next financial year.
“A weak exchange rate impacts all apparel retailers and higher product inflation in the first half is expected to impact unit growth.
As a value retailer, our prices will rise less, so comparatively speaking, we are well-positioned,” he said.
The group said that despite exchange rate weakness and volatility, the merchandise gross profit percentage was held in line with last year at 41.9 percent.
The cellular gross margin, which had a higher contribution to group gross profit than previously, rose to 6.4 percent, mainly due to critical mass being achieved in MRP Mobile.
There were declines experienced in some of the stores, such as Miladys, which reported a decrease in sales of 1.9 percent to R1.4bn.
MRP Home, which targets higher-income customers, delivered results that were well ahead of budget and the prior period, despite muted sales growth of 5.9 percent.
Sheet Street’s sales grew by 5.3 percent to R1.4bn.
Local online sales grew by 63.6 percent.
Bird said MRP Home would open a test store in Australia in October.
“The company’s strong cash generation and healthy balance sheet have easily absorbed the impact of these investments, which are important platforms for expansion,” Bird said.
Starbucks SA brand owner, Taste Holdings, is basking in the warm response the coffee chain has had since its local launch in April – and has detailed its plans for the franchise moving forward.
Taste reported its results for the full year ending 29 February 2016. Core revenue was up 41% to R1.01 billion, however Core EBITDA decreased to R47.2 million, while HEPS sunk massively to 1.5 cents per share from 16.1 cents per share in 2015.
This was due to increased borrowing and additional shares in issue, along with a depreciation increase caused by the corporate store ownership strategy involved with Domino’s pizza.
The group added 74 Domino’s Pizza chains in 16 months, and moved from having no corporate-owned franchises to having 26.
“Moving from no corporate stores to 26 in just four months, did not allow sufficient time to establish the necessary systems and controls, nor the human resource capability to align partners with the Domino’s culture and systems,” Taste said.
“This misalignment has been the root cause of many of the stores challenges and ultimately reflected in our short-term earnings. We are however confident that these challenges will be overcome in this year.”
Despite the Domino’s downer, the group was extremely happy with its launch of Starbucks in the country, saying the launch exceeded its – and Starbucks Global’s – expectations, with with queues still visible at the outlets weeks later.
“Our food offering is performing better than we envisaged and we are pleased with the adoption of the brand by the younger population – a segment that we believe is considerably underserved among South African offerings,” Taste said.
“We have also been able to offer what we believe is simply the fastest free Wi-Fi in a public retail food setting in South Africa.”
Looking at its strategy for Starbucks moving forward, the group said it would proceed with caution, having learned from its costly mistakes with Domino’s.
While the group previously said it would look at adding 12-15 new stores a year, it has now said it will rather focus on single-store profitability and testing out new concepts and formats for the brand.
Included in this is a trial for a drive-thru format for Starbucks in South Africa, which is expected in the “early roll-out” phase of the brand’s launch in the country.
SOUTH Africans’ desire for new shopping centres has been insatiable, and another mall has entered the fray.
After months of anticipation, the R4.9bn Mall of Africa, located next to the N1 highway in Midrand, opened on Thursday. The 131,038m² shopping centre is the largest first-phase completion of a mall in SA to date. It is still far smaller than malls in many developing Asian countries, which tend to average around 300,000m².
“The opening of this iconic mega mall marks a significant strategic milestone for retail in SA and indeed takes the African retail experience to a totally next level,” said Morné Wilken, CEO of listed property fund Attacq.
“As the 80% owner of Mall of Africa, the opening of the Mall of Africa marks a significant business milestone for Attacq and our business environment. Mall of Africa is a world-class lifestyle and retail destination, bringing significant value to the offering of the Gauteng province as the southern African sub-continent’s commercial powerhouse,” he said.
By 1.30pm, 70,000 people had walked into Mall of Africa. Mr Wilken said many customers were taking advantage of opening sales by large stores such as clothing retailers H&M and Cotton On and electronics group Dion Wired. Starbucks had also opened its second branch in the country and was “trading extremely well”.
“We are really excited about what this mall can do. It is located in an extremely good position. Shopping mall culture is very much entrenched in South Africans. In Gauteng, we hang out at malls. Families go to malls. It’s what we do. We feel we have built a centre which has a strong choice of tenants, more space and more facilities than any other shopping centre in SA,” said Mr Wilken.
He added that the mall would act as a strong catalyst for demand for premises in the surrounding Waterfall City, which had a further 663,815m² of bulk available for development.
“Waterfall City is seen as one of the most significant South African commercial developments of the decade. We feel all of its components will support one another and it will be a very successful development for decades to come,” said Mr Wilken.
Mall of Africa has around 300 stores and Attacq plans to extend it by about 25,000m², depending on market demand. Mr Wilken said the mall’s size meant it could support a variety of tenants.
The new mall, however, is not nearly as big as malls in many other developing continents.
In comparison, SM Prime Holdings owns the Mall of Asia, which is in Pasay, Philippines. This super mall is being extended from 400,000m² to 700,000m² and will have 1,300 stores.
Stanlib’s head of listed property funds, Keillen Ndlovu, said the Mall of Dubai in the United Arab Emirates was about 502,000m².
Other malls in Africa, however, tended to be smaller — aside from the Cairo Festival City Mall in Egypt, which was 168,000m². The Mall of Arabia, also in Cairo, had about 180,000m² of gross lettable area.
There are about 40 shopping centres sized 20,000m² or more that have been announced or are in production in SA, according to the Southern African Shopping Centre Directory of 2015.
Patrick Flanagan, head of development company Flanagan & Gerard, said developers must be careful where they build malls in an already saturated market.
“I think developers need to be careful. There are many shopping centres that have been announced which just won’t be sustainable in certain areas. Quite a few smaller centres are difficult to tenant in a slow-growth economy. We are also not a nation of shopowners like in the UK. We tend to rather shop at large retailers, so bringing more convenience centres to market can be risky,” he said.
Commenting on the Mall of Africa development, Louis van der Watt, CEO of the developer, Atterbury, said: “In line with the Atterbury vision to create working, shopping and entertainment spaces for everyone to live to their full potential, the development of this breathtaking shopping and leisure destination introduces an unmissable, unmatched retail experience. Mall of Africa’s exceptional scale, design, location and retail mix places it at the forefront of development.”
Van der Watt added: “The development has enhanced the diversity of the retail sector in South Africa, changed Gauteng’s skyline and stimulated the economy.”
Mall of Africa is co-owned by two leading South African property companies: JSE-listed real estate capital growth fund Attacq holds the commercial development rights to Waterfall and owns 80% of the Mall of Africa; Atterbury Property Developments owns 20% of Mall of Africa and is responsible for the Mall of Africa development project, on behalf of Attacq.
Mall of Africa will feature over 300 retailers, restaurants, entertainment and services. It also has all amenities that shoppers may need. Atterbury Asset Managers is responsible for Mall of Africa’s asset management for its co-owners.
Gauteng’s Mall of Africa to open on 28 April
Atterbury began the construction of Mall of Africa nearly three-and-a-half years ago, on 28 October 2012.
While the mall comprises some 130,000m² of gross lettable area, James Ehlers, MD of Atterbury Property Developments, noted that its construction area covers 550,000m² – or 78 rugby fields. A stroll around the building’s perimeter will take you on a walk of 1.75 kilometres.
Ehlers also reveals that over six kilometres of shopfront has been created inside the Mall of Africa. More than 530 kilometres of post tension cable has been used in its construction, as well as 18,500 tons of rebar and 205,000 cubic metres of concrete.
Hundreds of jobs
During the construction of the Mall of Africa, 3,078 people were employed for the project and, by January 2016, they had worked 10.41 million man hours.
“When the centre opens, hundreds of permanent and part-time jobs within the centre will be created on a sustainable basis,” said Ehlers.
A mall of the magnitude of Mall of Africa has massive pulling power for shoppers in the region and beyond, driven by its distinctive retail experience across two levels of exceptional shopping.
Lucille Louw, MD of Atterbury Asset Managers, confirmed that the Mall of Africa will open with seven anchor tenants and an array of international retailers that have chosen to debut their brands to South Africans at the mall, as well as an appealing line-up of flagship stores for all major South African retailers.
“Mall of Africa’s carefully considered retail mix creates a unique experience that is a major attraction. It offers a well-balanced variety of local and international brands, services, speciality shopping, entertainment and eateries. There will be something for everyone, with 2.4 kilometres of shopping and an exciting selection of 300-plus stores,” said Louw.
Anchor tenants at the Mall of Africa include Checkers, Edgars, Game, and Woolworths. They will be joined by leading South African brands from The Foschini Group, Mr Price and Truworths.
Top international brands
Louw revealed that top international brands opening their first stores in South Africa at the Mall of Africa include: Armani Exchange, Helly Hansen, Asics, Zara Home, The Kooples, Under Armour, Mango Man, women’secret and the Amsterdam-based Soap Stories.
These new retailers opening in the country for the first time will join a full pack of favourite brands like: H&M, Forever 21, Forever New, River Island, Mango, Starbucks, and Versace.
Louw added: “In addition to its exciting shopping appeal, Mall of Africa also includes endless entertainment. Customers can enjoy a state-of-the-art nine-screen Ster Kinekor cinema complex with Imax, and an extensive selection of 12 restaurants, fast food stores, coffee shops and cafés.”
One of the many leisure highlights at the Mall of Africa is a magnificent outdoor park with a children’s play area featuring an interactive musical water fountain.
A major benefit of the Mall of Africa is its central location in Gauteng and easy access from all areas. It is situated in Waterfall City, halfway between Joburg and Pretoria. It is highly accessible, located adjacent to the Allandale Road exit of the N1 Highway, the first free-flow intersection of its size in Africa. Atterbury has undertaken major road upgrades around the development to make it easy for shoppers to arrive at the Mall of Africa’s 26 entrances.
The mall has around 6,500 parking bays, most of which are undercover. It also offers valet parking, special drop-off facilities for buses and dedicated Uber pick-up and drop-off points – a first in the South African retail environment. It is also minutes away from the Gautrain Midrand Station.
Cobus van Heerden of Atterbury Property Developments commented: “Our commitment to responsible development, energy efficiency, sustainability and the implementation of green strategies is evident in Mall of Africa’s inspired design, construction and operational practices. As a developer, it is crucial to ensure the assets we create are environmentally responsible and as energy efficient as possible.”
The project implemented multiple green technologies, including a massive photovoltaic installation on the roof of the Mall of Africa. The installation will be the largest in Africa and will provide 4.8MVA of sustainable power for the centre. The mall will use grey water harvesting in all public toilets and for the irrigation of the entire development. Its design means natural light is maximized in the mall in such a way that shopper comfort is also optimised.
Van Heerden said: “Atterbury’s vision was to develop the highest quality retail property that offers an exceptional overall shopping experience and is a real asset to its owners, retailers and customers. We are excited this is now becoming a reality and can’t wait to share the Mall of Africa experience with everyone when it opens on 28 April.”
CLOTHING and apparel retailer The Foschini Group (TFG) is looking for retail space to bring its recently acquired UK chains Phase Eight and Whistles to its home market.
The group’s chief financial officer Anthony Thunström confirmed Phase Eight expansion plans in SA, saying: “We are currently looking at locations for Phase Eight. We probably will bring a limited number of both Phase Eight and Whistles stores to SA, (but) they could only be in your absolute premium shopping destinations.”
Mr Thunström said that the retailer thought it had a location, in Johannesburg’s Hyde Park mall, but had found that it was better suited for its G-Star Raw clothing store.
There was “massive growth that we continue to see in SA, and that really is because of the diversity of the different brands that we’ve got”, he said.
The group, which owns brands such as Markham, Mat & May, Charles & Keith and Donna Claire, acquired Phase Eight for £140m last year to spring-board its UK portfolio.
Last week, TFG announced it had bought a 100% stake in high-end mass market retailer Whistles for an undisclosed amount.
Kyle Rollinson, an analyst at Avior Capital Markets, said TFG’s expansion of Phase Eight into local markets would add value to its retail offering.
“Foschini has an extremely good portfolio of brands and I think it’s more of a value add, rather than trying to counteract a weak offering. Their offering is strong,” Mr Rollinson said.
TFG is no novice. Woolworths introduced its private label brand David Jones into its South African stores earlier this year, after it acquired the Australian-based women’s wear retailer in 2014 for R23.3bn.
Mr Thunström said: “I don’t think from a strategy point of view anything has changed … there is an advantage in risk diversification in terms of being in different geographies, and it’s certainly been a rand hedge.
“The reality is within this financial year … we will have opened roughly 200 stores in SA this year, and if I look forward over the next five years, we’ll open between 9,100 new stores in SA, so that’s massive growth that we continue to see.”
Chito Siame, an equity analyst at Mergence Investment Managers, said: “I don’t think that would be their primary strategy with regards to recently acquired foreign brands.
“Phase 8 would probably roll out faster in a Macy’s than back home. They are searching for growth, and they’ll buy it if they have to.”
Phase Eight has 107 stores and 203 concessions throughout the UK and Ireland. It also has 15 stores and 113 concessions in 16 global markets.
TFG shares gained 1.02% to close at R141.44 on Thursday.
Cape Town – South African retailer, Kids Emporium is set to open in the UK.
The opening of the new store will be complemented by the launch of the Kids Emporium UK online store.
South African owner and founder of the Kids Emporium franchise stores in South Africa, Lauren de Swardt, opened her first flagship store at the tender age of 22 years. Kids Emporium has since entrenched itself in the marketplace. Its brand strength stretches to the whole Kids Emporium shopping experience, introducing a cohesive world of expert parenting knowledge aimed at educating new parents, backed by good old-fashioned service.
De Swardt has developed the brand, with 26 stores now operative throughout South Africa, over the past 13 years.
“We want our brand to be accessible in the United Kingdom, offering the market affordable, innovative South African product lines, previously unavailable to locals. Seventy percent of the goods in-store will be manufactured in South Africa, with the intellectual property based in South Africa and the business operative in the United Kingdom,” said De Swardt.
Franchise applicants are carefully selected – the challenge with the Kids Emporium brand is to translate passionate service levels into interest. The company ethos is to equip pregnant customers with accurate knowledge, and de Swardt insists on personal customer attention because she believes her demographic, pregnant women, is one of the most challenging.
Guildford store franchisee and mother of two, Storm Copestake, was chosen to run the master franchise. Owner of the Ruby Rabbit baby-centric clothing range in the UK, Copestake has years of industry experience.
Product offerings will include exclusive ranges of children’s toys, gifts, furniture, décor, children’s wear, and maternity essentials with a difference. Some of the top local South African brands include baby bath apron and snuggle blanket range, Lily and Jack, Thandana luggage, sublime kids clothing brand, Sticky Fudge, and many more.
De Swardt says that logistically goods will be shipped across to the UK.
“It makes financial sense to do this. We are bringing a global brand to the UK that is renowned for good service from a nation of hard-working people and we’re proud to offer high-end products that are value for money. It’s a massive milestone, the United Kingdom was chosen as a first stake, and we see the opportunity for a store that offers something completely different,” said De Swardt.From Fin24.com
Al Futtaim Group, the Ikea operator in the region, plans to open another store in Dubai in the next two years.
An Ikea official said that despite the challenging economic climate in the UAE, sales at the Swedish retailer had not been hit despite footfall at its stores in the emirates slowing between by 1 and 2 per cent so far this year.
However, its online offering doubled its sales last year compared with 2014 and its in-store restaurants have delivered huge growth.
“Even in 2008, when the financial crisis began, Ikea posted increasing sales,” said John Kersten, the managing director at Ikea for the UAE, Qatar, Egypt and Oman.
“Ikea does well in times of crisis. We know the retail climate is challenging as companies that we use are now offering deals that have not been available before.” He said Ikea sold three and half million plates of meatballs and 730,000 shawarmas in the UAE last year. “With those numbers we can keep prices very low,” Mr Kersten said.
The Swedish brand has posted double-digit growth in sales in its outlets across the UAE, Qatar, Egypt and Oman for the past four years.
Last year, the retailer also opened a customer ordering and collection point in Al Ain.
Yesterday Ikea said that it had chosen Abu Dhabi as one of three stores worldwide, including Canada and Sweden, to pilot a new store solution.
The “make a room for life” concept embraces the four walls of most people’s living spaces by offering a total design solution from floor to wall to ceiling and the soft furnishings in between.
The living room, a 2,500 square metre space at Ikea’s Yas Island store, is the first area to offer the experience, but the new concept will be rolled out across dining, bedroom and kitchens this year.
“We feel there was a lack of inspiration in Ikea. Everything has been created to inspire in the new concept.”
Mr Kersten added that the Arabic, Asian and European-styled concept rooms would cater to the different tastes of the population in the UAE.
“[Abu Dhabi] was chosen as a pilot store because we saw from our experience in Qatar that the Ikea concept needs to be tailored to the locale,” he said.
Cape Town-based Foschini, With 2,000 stores in South Africa, is the latest South African company looking to the U.K. to diversify revenue sources as the rand weakens to around 23 percent against the dollar, the Telegraph reported.
An independent chain store, Foschini has 17 retail brands that it sells — mainly under its own private label — in clothing, jewelry, accessories, sporting and outdoor goods, cellular and home ware.
Foschini bought Phase Eight, a British women’s designer clothing brand in 2015 and now it’s after U.K. clothing brand Whistles, the Telegraph reported.
Whistles has 49 stores in the U.K. plus concessions in department stores including Selfridges, Harrods and Bloomingdales.
There are several prospective buyers and Whistles has asked advisers at professional services company KPMG to prepare for a sale, the Telegraph reported.
If a Whistles takeover happens, it will be the latest in a series of South African companies buying British retailers.
Acquisitions of Western businesses by overseas buyers are at an all time high and growing, according to New York City-based professional services firm Deloitte.
Mergers and acquisitions are becoming increasingly popular for foreign companies wanting to invest in the U.K., Deloitte said in “Investing in the UK: A guide for South African businesses”.
In 2015, Brait, the investment vehicle for South Africa’s richest billionaire, Christo Wiese, bought U.K. fashion retailer New Look in a $2.7 billion US deal.
Truworths acquired footwear business Office Retail Group for $363.8 million.
Steinhoff International recently entered a bidding war for British catalog retailer Argos and London-listed electrical retailer Darty.
Whistles CEO Jane Sheperdson bought a 20-percent stake in Whistles in 2008 and is credited with engineering its comeback.
Whistles has 49 stores in the UK and 76 concessions in shops including Selfridges, Harrods and Bloomingdales.
Foreign companies are becoming increasingly confident in their ability to finance and execute deals, according to Deloitte. “And foreign private equity acquirers, those who buy in to a company primarily as an investment rather than as an addition to their existing business, are becoming more established.”
Home Retail Group has received a £1.4bn rival bid for Argos after supermarket Sainsbury’s offered £1.3bn for the company.
The second takeover offer has come from South African retailer Steinhoff, which offered 175p per share.
Sainsbury’s has until 23 February to make a firm offer for Argos.
Home Retail Group said the board was reviewing the Steinhoff proposal and it would make a further announcement soon.
A spokesperson added: “Home Retail Group shareholders are advised to take no action at this time.”
Sainsbury’s second offer for Home Retail Group came after an offer of £1bn was rejected.
Steinhoff, which owns the furniture chain Harvey’s in the UK, makes most of its products in developing countries, and sells its furniture across Europe.
The South African retailer said its offer would not disrupt the sale of Homebase, which Home Retail Group is in the process of selling to Australian retail company Wesfarmers. The firm plans to bring its Bunnings chain to the UK.
Sainsbury’s, like other UK supermarkets, has faced intense competition from discount retailers such as Aldi and Lidl.
Chief executive Mike Coupe said if the takeover went ahead the combination of the two companies would create the UK’s “food and non-food retailer of choice”, with 2,000 stores.
The tie-up would create the UK’s largest general merchandise retail business.
Mr Coupe said that the merger would bring savings in the region of £120m – half of which would come from putting Argos stores into Sainsbury’s supermarkets.
Meanwhile Steinhoff has until the 18th March to make a firm offer.
“We chose this West Street location for its high volumes of foot traffic and for its positioning as a transport hub and gateway to one of Africa’s biggest economies,” said Krispy Kreme’s CEO, Gerry Thomas. “An international brand as recognisable as Krispy Kreme is what people expect to see when visiting a metropolis such as Sandton.”
Thomas further assured fans that the opening day will follow the festive trend of the Rosebank launch, with a ribbon cutting and enticing prizes up for grabs. Along with T-shirts for the first 100 customers in the queue, they will also stand a chance to win doughnuts for six or 12 months, depending on how close they are to the number four position. The die-hard fans who elbow their way to positions one to three will receive a dozen Krispy Kreme’s original glazed doughnuts every week for a year, six months and three months, respectively. Fans are encouraged to keep an eye on Krispy Kreme social media updates to know exactly when and where they need to be in order to stand a chance to win.
The Krispy Kreme brand, which is owned jointly by franchise companies Fournews and John and Gerry Brands, is set for rapid expansion over the next year. “Our aim is to open at least six more stores before the end of 2016 in Gauteng, with a long-term plan for 31 outlets across the country over the next five years,” continued Thomas. “With such a strong positive response to our first store, we look forward to being able share the joy of Krispy Kreme with many more stores in the months to come.”
LONG ROAD: At a results presentation on Wednesday, recently appointed Edcon CE Bernie Brookes outlines changes the heavily geared apparel retailer is making to bring customers back and streamline operations. Picture: MARTIN RHODES
LONG ROAD: At a results presentation on Wednesday, recently appointed Edcon CE Bernie Brookes outlines changes the heavily geared apparel retailer is making to bring customers back and streamline operations. Picture: MARTIN RHODES
This is the second round of job cuts at Edcon’s head office, following last February’s retrenchments, and the process is expected to be completed by March
EDCON, the retailer that owns brands such as Edgars, CNA and Jet, will cut jobs at its head office as part of its turnaround strategy.
“The process commenced on February 5 — it is still too early to have a final number at this stage; definitely not two-thirds of workforce. We anticipate that the process will only be concluded around March,” a spokesperson said.
Media reports claiming it would slash two-thirds of its 3,000 head office staff were “factually incorrect”, the company said. This is the second round of job cuts at its head office, following last February’s reduction.
Edcon was bought by Bain Capital for R25bn in 2007 in a deal that burdened the retail group with debt.
The company, under new CEO Bernie Brookes, was looking to take back market share through boosting store space productivity and reviving its high-margin private label brands such as Kelso at its ailing Edgars chain.
The job cuts will not affect stores.
AS A stock analyst with nearly two decades’ experience, Sasfin Bank’s Alec Abraham has seen a number of high-flying companies crash back to earth. In recent months, he became concerned about what he saw as an alarming shift in focus from the one-time darling of the clothing retail sector, Mr Price.
“For years, Mr Price’s philosophy was to provide designer fashion at an affordable price. It got them a prime slice of that higher income market, and it worked exceedingly well,” says Abraham.
He isn’t exaggerating: the company hit a sweet spot that few others were brave enough to try during the dark days of the late 1980s, when the economy was battling under PW Botha’s last kicks of grand apartheid.
At the time, founders Laurie Chiappini and Stewart Cohen had returned from a trip to the US with the plan to replicate the American cash-based factory shop idea — a somewhat radical proposition, as the dominant idea at the time was of a retail sector led by the likes of Edgars pushing credit.
In the end, what Chiappini and Cohen succeeded in doing was to launch one of SA’s great retail success stories. Shoppers flooded stores, seeking out Mr Price’s “on-trend” clothes which aimed to make “catwalk fashion accessible to customers at highly competitive prices”.
And investors made a killing. In the past decade alone, Mr Price’s stock has provided a total return, including dividends, of 513%. For those who invested R10,000 in 1989, they’d now have R4.5m.
Yet despite this fantastic start, Mr Price seems to have lost its lustre. Its harshest critics think the company has lost its mojo.
“It seems to me,” says Abraham, “that Mr Price’s merchandise has become more mainstream. Sure, they’ve got more of the young, emerging black middle class into their stores, but they’ve lost a little bit of their differentiation, and alienated their higher-income customers”.
Such a step down would be risky, exposing a retailer to customers who are more at the mercy of a faltering economy.
To add to the pressure, a number of hot-shot foreign retailers have opened shop here, among them the Australian brand Cotton On, Sweden’s H&M and Spain’s Zara. These have struck a chord with shoppers.
Predictably, Mr Price’s brass disagreed with Abraham’s view. Though the company says its philosophy hasn’t changed, there certainly appears to have been a shift on the store floor.
Shares in SA’s biggest retailers have tracked downwards in the past few months on expectations that weak economic growth and a rising interest rate cycle would curb consumer spending. The group’s last price peak was R201.78 in April.
The group owns brands including Foschini, Markham, Totalsports, @Home and American Swiss. Last January, it bought an 85% stake in UK women’s fashion chain Phase Eight. At end-September, it had 2,913 outlets in 31 countries including the 523 Phase Eight stores.
In a trading update, group CE Doug Murray said between 29 November and 26 December, group sales had risen 27.2% compared with a year ago. Excluding Phase Eight, turnover growth was 13.5%, and growth on a like-for-like basis, excluding new store openings, was 6.9%.
Other than at Phase Eight, its strongest category was clothing, where same-store sales jumped 9%, followed by cellphones, up 8.7%. The weakest categories were homewares, where same-store sales growth was a negative 2.9%, and jewellery at a negative 0.5%. In cosmetics, same-store growth was up 5.2%.
The group grew cash sales 20.8% last month and credit sales 7%. Total group sales in the nine months to 26 December rose 33% compared with the same period in 2014, or 11.6%, excluding Phase Eight.
On a same-store basis, sales were 5.8% higher.
The trends for the nine-month period were a little different from Christmas, as clothing and cosmetics were the strongest categories, followed by homewares and jewellery. Cash sales rose 17.3% over nine months and credit sales 7%.
In the nine-month period, merchandise inflation, excluding Phase Eight, was 7.5% on average, Murray said.
“Higher cash than credit sales growth continues to support our view that, although the credit market may be marginally improving, cash sales still have more legs,” Momentum SP Reid analyst Alex Sprules said.
Murray said sales had continued to be good, with same-store growth, excluding Phase Eight, rising 6.2% in the two weeks to 9 January.
MR PRICE’s shares declined 5.52% to R202.19 after a slowdown in its first-half sales growth failed to live up to its shareholders’ high expectations.
A senior analyst said the group had lost its “designer look for cheap” edge as it shifted its merchandise styling.
“Two years ago they moved styling mainstream to get more of the young black market. Mr Price became one of the many moving into that space — making them more cyclical due to their exposure to the lower market. They began to buckle when the economy started to go down because of this move,” Sasfin Securities’ Alec Abraham said.
Mr Price reported a 16.7% rise in net income to R1.08bn in the 26 weeks to September 26 — a deceleration from the 23% gain in the same period a year earlier. Revenue grew 9.2% to R9bn with retail sales increasing 8.6% to R8.6bn, with comparable store growth of only 4%.
In Wednesday’s results statement, CEO Stuart Bird blamed a high comparable base in the group’s apparel business, the timing of the Easter school holidays and the late onset of winter. “The economy is not in good shape and consumer confidence is understandably low.
“We were trading off an exceptional performance in the corresponding period last year … (where) Mr Price apparel grew sales by 20% and comparable sales by 15%. In so doing it created an extremely high base to beat in a softer trading environment,” he said.
The group’s gross profit margin of 40.1% was 1.3% lower than last year. The merchandise margin was hit by exchange rates and, to a lesser extent, higher markdowns, and fell 1.1% to 40.7% of retail sales.
Mr Abraham said had the retailer not moved “down-market” and away from the very robust “top end”, the group would have had a more resilient top-line performance.
“Five years ago, what made Mr Price so strong was that their clothes looked like designerwear, but cost you nothing. Their primary market was upper-income groups, the kind of person who had one or two R8,000-a-pair True Religion jeans and would mix it up with Mr Price pieces and it looked really good. At that point they were catering to a niche market.”
Mr Bird said: “The consumer environment could deteriorate further and we will still be up against a very challenging base in the second half of the year.”