Category Archives: #southafrica

Mr Price takes control of its Kenya franchise

Mr Price store at the Junction in Nairobi. file PHOTO | NMG

South Africa-based Mr Price Group has taken direct control of its Kenya business after reclaiming its franchise from fashion apparel retailer Deacons East Africa.

The two firms on Thursday announced that Mr Price will from April 1 assume the operations of its 11 Mr Price stores in Kenya. Deacons had held the Mr Price Kenya franchise for a decade.

The Nairobi Securities Exchange-listed firm mid last month agreed to sell the Mr Price Home and Mr Price apparel brands, which have been operating in Kenya since 2007, effectively ending Deacons’ 10-year franchise deal with the Johannesburg Stock Exchange-listed company.

“Notice is given under the Transfer of Businesses Act that the Mr Price franchised business carried on by Deacons (East Africa) Plc will be transferred on or about April 1, 2018, (subject to the fulfillment of conditions precedent) to Mr Price Retail Kenya Limited which will carry on the business,” said the firms yesterday in a regulatory notice.

The firms added Mr Price would now assume all financial obligations related to the business.

“All money debts or liabilities due and owing the transferor in respect of the business up to the date of transfer shall be received and paid by the transferor,” they said.

“The transferee is not assuming nor is it intended to assume any liabilities incurred by the transferor in the business up to the date of transfer.”

The Deacons board approved plans to sell its flagship Mr Price franchise in Kenya last October. The proposed deal came amid a 12 per cent drop in earnings for the Johannesburg-based firm, marking its first decline in annual profit since 2001 as South African consumers slowed purchases in a struggling economy.

READ: Deacons warns of profit dip on polls

Deacons, which operates several branded stores in Kenya including Truworths, Angelo, 4u2, Reebok and Babyshop, has indicated that its earnings for the full-year through December will drop by at least a quarter, citing a tough operating environment.

Deacons’ exclusive franchise deal with another South Africa’s luxury fashion brand Woolworths ended in 2013 after the multinational took full ownership of its Kenyan subsidiary.

Deacons posted a half-year net loss last year of Sh180 million.

Deacons’ principal business is to operate retail establishments including franchise and department stores selling ladies, men’s and children’s clothing, footwear and accessories among other items in East Africa.

Top franchising trends for 2018

©Ian Allenden via 123RF

The franchising industry has steadily shown adaptability to the tough economy by growing the sector 3,6% over the past four years – from contributing an estimated 9,7% to the country’s GDP in 2014 to its recent figure of 13,3%. This trend is expected to continue on the same trajectory in the short-term and could possibly improve should SA see better economic growth.

According to a survey conducted by the Franchise Association of South Africa (FASA), 78% of most franchisors are optimistic about future growth in their businesses. Although this translates to positive sentiments, the franchising is still, like other businesses, also vulnerable to the economic headwinds. As a result, franchisors need to keep abreast of their operating environment.

Here, Cronje shares top trends to look out for in 2018:

The significance of online and social media

Traditional marketing is no longer the magic bullet as more people are starting to use social media to interact with brands, whether to express anger, inquire or to show appreciation. It is no longer about the question of should a business use social media or not, it is now more about how a business uses social media to better serve its customers.

Multi-brand franchisees

More franchisees are starting to jump into the bandwagon of having several franchisees on their belt not just having one, doing this helps to improve cash flow as well as the protection of the ups and downs in business.

Health and education

According to FASA, these two sectors are rapidly growing, because more people are starting to become health conscious, while on the other hand education is a priority for South Africa. As a result, there is a strong demand for these sectors.

Increased customization

Consumers have gained control of what they want; it is no longer about what do you have on the menu, it is now about how your product or service can be tailor-made to what a customer really wants. For example, Brian Altriche, founder of RocoMamas with 61 franchise outlets is of the view that his business model clearly responds to the essence of this trend by allowing consumers to create their own burgers as they want.

On-demand products/ services

In this fast-paced environment, customers control their experiences by wanting products or services that speak to this need. Franchisors who want to expand their business should start exploring this trend.

“2018 will no doubt bring its challenges, however for every challenge there is a window of opportunity to explore. We are advising franchisors to scrutinise these trends carefully, it can definitely give them a boost for 2018,” concludes Cronje.

Mr Price cuts its cloth to suit a higher share price

Credit: Freddy Mavunda

The share price jumped 11% to R169.99 after the announcement. The momentum continued for most of the trading session, with the share eventually closing at R192.25.

Diluted headline earnings per share are expected to rise between 421.4c and 439c.

Portfolio manager at Gryphon Asset managers Casparus Treurnicht said although the company did not give much information, it was clear that the guided range was significantly higher than the market expected.

“After Truworths and TFG came forward last week there might be a combination of short positions being covered and a sigh of relief,” Treurnicht said.

Mr Price’s share price recovery came after it lost 20% in 2016. The main losses came in August 2016 when the company lost 16% in one day after releasing a disappointing trading statement. The share price has since gained about 20% in 2017.

In its 2017 annual results presentation in March, Mr Price CEO Stuart Bird said that the strategy going forward would focus on improving the quality of merchandise while applying an everyday low-price pricing strategy and integrating technology to improve operations and customer experience.

Much like the rest of the retail sector, Mr Price has been affected by weak and declining consumer spending, which continued into the first half of 2017. The retailer’s recovery has been boosted by a number of factors.

Equity analyst at Vele Asset managers Matthew Zunckel said that judging by the positive trading statement the recovery of Mr Price was bumped up by a change in its procurement model, which was the main driver of growth.

The company previously faced issues of procurement and the quality of its merchandise was a constant complaint from consumers in 2016, among other misgivings.

Fashion chain Hobbs bought by South African firm

The deal saw private equity owner 3i offload the business for an undisclosed sum, although a price tag of £80 million has been mooted.

Hobbs has become the latest British retailer to fall into South African hands after it was acquired by The Foschini Group.

The deal saw private equity owner 3i offload the fashion company for an undisclosed sum, although a price tag of £80 million has been mooted.

Hobbs, a favourite of the Duchess of Cambridge, has 140 outlets globally, including a concession in Bloomingdales, and booked revenues of £120 million last year.

Royal visit to Norfolk

Foschini, which also owns Phase Eight and Whistles in the UK, said it will look to enhance Hobbs’ online presence.

Foschini chief executive Ben Barnett said: “Hobbs is a strong British brand with rich design heritage. (Hobbs chief executive) Meg Lustman and her team have successfully repositioned and reinvigorated the brand, offering an excellent platform for further growth.

“We share their ambitions, not only in terms of maximising the success of their well-established UK presence, but also in their strategic approach towards leveraging the international appeal of the brand, via their physical store portfolio, carefully aligned concession partners and evolving e-commerce proposition.”

It is the latest in a long line of British retailers to get new owners from South Africa.

Struggling fashion chain New Look is owned by investment group Brait, while Steinhoff is the parent firm of Harveys and Bensons For Beds.

But the deal comes at a difficult time for the high street, with retailers across the board struggling with rising costs and falling consumer confidence as Brexit-fuelled inflation hits the sector hard.

On Tuesday new data from the British Retail Consortium showed that growth in non-food sales hit a record low in October

Storm brews as Shoprite investors challenge pay policy

Mehluli Ncube, representing the Sentinel pension fund, described the invitation to participate in the teleconference as a little hostile. Ncube, who attended the annual general meeting on Monday to express his concerns about the remuneration policy, said the teleconference was in line with the new JSE requirements, which oblige companies to engage with shareholders if more than 25% of them votes against the remuneration policy.

The obligation is in line with the King IV recommendation, which also requires Shoprite to disclose with whom it engaged, the manner and form of engagement and the reasons for the dissenting votes. Shoprite should also disclose the steps taken to address “legitimate and reasonable objections”.

At Monday’s meeting, almost 30% of the shareholders voted against the remuneration policy — this was in line with the voting pattern of the previous three years. However, if the ordinary and deferred shares held by controlling shareholder chairman Christo Wiese are excluded, the level of opposition shoots up to 65%.

In financial 2016, 66% of “outside shareholders” voted against the remuneration policy. Ncube said they had consistently voted against the remuneration policy in the past because they felt the package awarded to the previous CEO, Whitey Basson, was out of line.

Ncube said that the teleconference was a new development, but the company had engaged with them after past annual general meetings. “Previously, the investor relations people engaged with us on an individual basis and that was quite constructive. I’m not sure how well the teleconference will work,” he said.

One analyst, who did not want to be named, said that the vote against the remuneration policy had increased in 2017, although the policy had actually improved “if you compare the new CEOs incentives with Whitey Basson’s package”.

“Outside shareholders” may have been concerned by the R50m paid to Basson in 2017, although he had played an executive role for only six months of the year. A footnote in the annual report says that Basson, who gave notice of his retirement on September 30, 2016, had an agreed notice period of 12 months. “He, therefore, receives guaranteed pay until 30 September 2017”.

However, a Sens announcement released on October 31, 2016, said that Basson was retiring at the end of December 2016 and would remain as nonexecutive vice-chairman.

On Monday, Shoprite announced that Basson, who has driven the group’s growth for 45 years, had retired from the board on October 25.

Truworths’ share price falls after disappointing sales report

The clothing chain said this was partly because it reported in weeks, and the decline would have been only 2% if the previous 53-week financial year had not shifted the comparative periods by a week.

Truworths said half of its total sales were “account” and half were cash. Both declined by 3%.

The group’s trade receivables book decreased by 4% relative to the previous period to R5.6bn. The percentage of active account holders able to purchase improved to 85% compared with 83% in the prior period.

At its flagship Truworths chain, account sales comprised 69% of total sales. Sales at Truworths stores declined 2% to R4bn despite its trading space growing 3% from the matching period.

Clothes on average were 1% cheaper than in the matching period in 2016, according to the update.

The group’s UK chain Office kept sales level at £89m, but contributed a decline measured in rand. Its trading space increased by 1% on the prior period and is expected to increase by 2% for the full fiscal period.

Competitor TFG is scheduled to release its results for the six months to end-September at about 1.30pm on Thursday.

MySidekick shopping app launches across SA

South African startup MySidekick has launched its free Android-based shopping app across the country, offering users special deals from retailers such as Clicks, Dis-Chem and Volpes.

Incubated at the Nedbank Stellenbosch University LaunchLab business incubator, MySidekick has developed an application that provides users with relevant shopping deals and in 2015 secured a R4 million (US$280,000) staged investment from Stellenbosch-based technology funder and developer Alchemy-A.

“The user can personalise the app so that they only see specials of product categories they are interested in, and this can easily be changed or updated by the user. We then have proprietary algorithms that make sure there is a good variety of specials on display,” said MySidekick chief executive officer (CEO) Leonard Brewer.

“When a user arrives at a mall, they receive a notification reminding them that there are relevant specials for them, and they can then open the app from the notification to browse through them so they can decide which store to go to, to save some money.”

The aim of the app is to save the user time and money by showing them relevant retailer specials as they shop. On installation, the app will ask the user what they are interested in and then notify them of tailored specials when they arrive at a particular shopping destination.

“And it’s clever enough to know you’re not just passing by, it will only notify you once you have parked your car and are walking to the entrance,” said Brewer.

Clicks targets 900 stores after ace results

On Thursday the retail-led healthcare group posted a 15.4% rise in operating profit to R1.8bn driven by strong health and beauty sales that grew 14.7%.

Opening 111 stores, including 80 through the outsourcing agreement with the Netcare Group, bumped up its store footprint to 622. Its pharmacy network was increased to 473.

During the 2017 financial year, the retailer’s cash inflows from operations exceeded R2bn for the first time.

Clicks plans to invest R680m during the 2018 financial year to add 25-30 new stores, and about 35 pharmacies, among other things.

CEO David Kneale said the company was confident it would reach its new store target.

Only 50% of households in SA lived within 5km of a Clicks store, presenting a gap for growth and convenience. “We believe the faster growth we experienced in the beauty and pharmacy divisions will lead to a 6.5%-7.5% growth in the medium term,” said Kneale.

36One Asset Management equity analyst Daniel Isaacs said the company’s targeted store footprint had jumped from 600 to 900 over the past few years as it spotted certain areas growing more than predicted.

But he warned that if today’s economic environment continued, it would negatively affect the growth plans of Clicks and all other retailers.

“You can be a very well run business, but you can’t compete against or escape the environment,” Isaacs said. Electus Fund Managers analyst Damon Buss said that because of income inequalities not everyone could afford to shop at Clicks.

While the company would probably meet the target it would take a significant time.

Online shopping would have long-term effects on foot traffic while store location would remain a key issue.

“You run the risk of cannibalising some of your current store base or you put them in a less optimal location,” Buss said.

While retail health and beauty sales, including Clicks and the franchise brands of The Body Shop, GNC, and Claire, increased 14.7%, the Musica business performed poorly. Musica’s profit in the year under review was R28m lower than a year earlier but Clicks chief financial officer Michael Fleming said the company was managing the Musica brand for shareholder value.

However, the group would be open to selling the music and gaming retail chain to any suitor ” with a chequebook that won’t bounce”.

Clicks ClubCard increased active membership to 7-million, with the loyalty programme accounting for 77.4% of sales in Clicks stores.

Clicks declared a final dividend of R2.34 per share,

taking the total for the financial year to R3.22, an 18.4% increase on the previous year.

The company’s share price closed 0.55% down at R154.35 on the JSE on Thursday.

Lloyds Pharmacy closes 190 store

Lloyds Pharmacy closes 190 stores, blaming government cuts

Reduced funding, higher business rates and the apprenticeship levy created ‘challenging market conditions’

Lloyds Pharmacy has announced it will close nearly 200 stores across England because of changes in government policy, with its parent company also blaming funding cuts and the apprenticeship levy.

In an internal letter to staff Cormac Tobin, the managing director of Lloyds Pharmacy’s owner, Celesio UK, said around 190 pharmacies would cease to trade through a combination of closures and disinvestments.

The leaked internal memo to staff, which was verified by a spokesman for Celesio UK, said the business had been hit by pharmacy funding cuts, as well as higher business rates and the apprenticeship levy, which had made “market conditions challenging”.

“Community pharmacy needs to adapt to the changing requirements of patients and the NHS, indeed it should be part of the solution to an overstretched health service,” Tobin said in the memo.

“To achieve this, we need a new operational framework that creates a thriving pharmacy network that continues to offer essential integrated healthcare and is rooted in local communities.”

The number of staff who could be affected by the closures was not confirmed by a spokeswoman for Celesio UK, who said current employees may be moved to other locations. But some pharmacists have taken to social media to warn of hundreds of job losses.

Aisha Adnan, a locum pharmacist, posted: “A branch [on] average has five staff and that equates to roughly 1,000 staff being laid off, plus so many pharmacists and locum pharmacists [will] lose their jobs and patients [will] lose their trusted services. This is not the picture of health.”

Thorrun Govind, a pharmacist in north-west England, said: “This is going to impact the most vulnerable patients and, with the GP crisis and pressures on the NHS, the funding cuts were most unwelcome.

“Patients need an accessible healthcare professional to provide advice, medicines and so much more to reduce pressure on other NHS resources. The closure of these pharmacies is disappointing when pharmacists should be supported to provide much more for the NHS.

“I would like to see independent pharmacists prescribers enabled to allow pharmacies on the high street to become triage centres not a reduction in pharmacies.”

Tobin said the company would be taking steps to support staff and minimise disruption for patients.

Julie Cooper, the shadow minister for community care, described the decision as “a devastating blow for Lloyds Pharmacy staff and their patients right across the country. The government is taking hundreds of millions of pounds of support away from pharmacies and now we see that it is patients who will pay the price.”

Cooper urged ministers to outline plans to support “the hundreds of Lloyds Pharmacy jobs that are now at risk” and explain what support will be put in place for patients reliant on their service. “The Tories are prioritising saving money over care. They cannot just expect elderly patients to get their prescriptions via an online service, without any support with their medication,” she said.

A spokeswoman for No 10 said there were measures in place to ensure people could access a pharmacy. She said: “There are almost 12,000 private pharmacies in England and these closures make up just 1.6% of the number. We don’t have full information on the announcement as yet, but we do make sure that patients can access pharmacists where they need to.”

Deacons plans sale of Mr Price franchise to SA firm

The firm’s chief executive, Muchiri Wahome, says the move comes after South Africa-based Mr Price Group Ltd approached Deacons with a proposal to purchase the chain of stores.

“The proposed transaction will be subject to various conditions that include requisite approvals from regulatory authorities and the shareholders of Deacons through a shareholders’ meeting to be convened once the sale agreement has been finalized,” said Mr Wahome in a statement yesterday.

Mr Price Group Ltd plans to purchase the Mr Price Home and Mr Price apparel brands which have been operating in Kenya since 2007, effectively ending Deacons’ 10-year franchise deal with the Johannesburg Stock Exchange-listed South African company.

The deal, if approved by regulatory authorities, will see the South African firm take over all 11 Mr Price Home and Mr Price apparel stores in Kenya.

The proposed deal comes amid a 12 per cent drop in earnings for the Johannesburg-based firm, marking its first drop in annual profit since 2001 as South African consumers slowed purchases in a struggling economy.

Deacons suffered a similar fate this year after posting a half-year net loss of Sh180 million citing a tough operating environment. Net loss for the period (June 30) deepened by 242.81 per cent as inflation ate into the spending power of consumers amid rising expenses.

Deacons’ principal business is to operate retail establishments including franchise and department stores selling ladies, men’s and children’s clothing, footwear and accessories among other items in East Africa.

Deacons’ exclusive franchise deal with South Africa’s luxury fashion brand Woolworths ended in 2013 after the multinational took full ownership of its Kenyan subsidiary.

“We had a franchise (agreement) then it moved to a joint venture and Woolworths will now be an independent brand run by them (Woolworths Holdings),” said Mr Wahome at the time.

Mr Price wins in battle against slowdown

“As reported at the year-end results presentation in May 2017, given the current low-growth economy and resultant poor retail environment, the most significant near-term opportunity is to regain lost market share in the two divisions, MRP Apparel and Miladys, which underperformed in the previous financial year,” the group said.

The group reported in the trading update that for the first four months of its 2018 financial year, total retail sales were up 6.2% in the 18 weeks to August 5. For April, May and June, MRP Apparel and Miladys reported sales growth of 10.1% at current prices, far ahead of the 4.8% growth that Statistics SA reported for the retail sector.

The trading statement was well received, with Mr Price’s share price closing 3.45% higher at R187.50 on Friday.

Sales growth in the overall apparel segment, which includes MRP Sport, was 8.7% in the 18 weeks to August 5. The homeware division struggled, however, with sales declining 1%, due to a 2.1% fall in sales at MRP Home, partially offset by a 1.7% increase at Sheet Street.

Online sales were 6.4% higher. Those at MRP Sport and MRP Home growth tracked physical store sales growth, while MRP Apparel recorded very strong growth of 20.1%.

Group cash sales increased 6.3%, making up 82.6% of total sales. Credit sales increased 5.4%. Weighted average trading space was 2.6% higher.

Other income grew 3.4%, to R372.0m. Debtors’ interest and fees grew 7.7% and insurance revenue climbed 18%.

A temporary slowdown in cellular revenue growth, which fell 8.1%, resulted from a focus on process improvements and product mix changes.

Commentators expect some respite for the retailer sector in the last quarter of 2017.

Shoprite African retail giant eyes Poland, Europe

Shoprite, Africa’s largest food retailer, wants to expand to new continents and is eyeing Poland as its gateway to Europe, the Puls Biznesu daily has said, adding its scepticism.

Photo: Lars Frantzen/Wikimedia Commons (CC BY-SA 4.0)

Shoprite CEO Pieter Engelbrecht, who visited Poland last week and is in talks with two developers, said entering Eastern Europe would be easy because the African retail giant already has partners in the region, the Puls Biznesu daily said.

South African-based Steinhoff International, owner of the Abra furniture retailer which has 100 locations in Poland, is looking at a controlling stake in Shoprite, which has a market value of some PLN 35 billion (EUR 8 billion), the paper said.

The paper added that Steinhoff is controlled by South African businessman Christoffel Wiese, who is already Shoprite’s main shareholder.

Engelbrecht said Shoprite could use Steinhoff’s synergy in Poland, according to Puls Biznesu, but declined to give the paper details about its plans for expansion in Poland or how partnering with a furniture chain would benefit the food retailer.

Puls Biznesu said that the Polish market was saturated with well-established fast moving consumer goods (FMCG) companies and while a South African takeover of an existing chain would be a feasible way of entering Poland, building its brand from scratch in Europe would “not be easy”. (vb)

Shoprite Profit Rises as South Africa Stores Prove Resilient

Earnings in line with estimates; Sales growth to continue

First financial statement after Steinhoff move to buy stake

An employee inspects a community notice board inside a Shoprite Holdings Ltd. supermarket in Johannesburg.

Photographer: Waldo Swiegers /Bloomberg

Shoprite Holdings Ltd. reported full-year earnings in line with analyst estimates as Africa’s largest food retailer boosted market share in South Africa ahead of a partial tie-up with clothing and furniture specialist Steinhoff International Holdings NV.

Headline earnings per share, which exclude one-time items, rose 12 percent to 10.07 rand in the 12 months through June, the Cape Town-based company said in a statement on Tuesday. The board declared a full-year dividend of 5.04 rand a share, an increase of 12 percent. Shoprite expects “positive sales momentum to continue,” the retailer said, after revenue advanced 8.4 percent.

Pieter Engelbrecht on Aug. 22.

Photographer: Halden Krog/Bloomberg

The shares rose 2.5 percent to 206.08 rand as of 9:23 a.m. in Johannesburg, extending the year’s gain to 20 percent and valuing the company at 123 billion rand ($9.4 billion).

“We believe there is room for further growth as we continue to improve efficiencies and profitability both in South Africa and beyond the country’s borders,” Chief Executive Officer Pieter Engelbrecht said. While the South African economy is in a recession, “the group remained resilient with growth in sales and market share.”

The earnings are the first to be reported by Shoprite since fellow retailer Steinhoff agreed to buy a 22.7 percent stake as part of the planned listing of its African assets including clothing chain Pep. This will be the first step taken by South African billionaire Christo Wiese, who chairs and is the largest shareholder in both companies, in combining his interests in the retail giants. A previous plan was called off in February.

What Benefits?

“We don’t really see the synergies between food and furniture and more information is needed on how these benefits are found,” Damon Buss, an analyst at Electus Fund Managers Ltd. in Cape Town, said by phone. “We also have questions about the difference in strategy between the two companies with Shoprite having been more organic growth traditionally and Steinhoff more acquisitive growth.”

The shares fell the most in almost four months on July 18 after Shoprite reported weaker second-half sales growth partly due to a slowdown in stores beyond its home market. Retailers including Shoprite have been relying on growth across sub-Saharan Africa to help offset sluggish trading in South Africa, where consumer confidence has deteriorated.

The company has been focused on capturing market share in three different tiers of customers, Charles Allen, a London-based analyst at Bloomberg Intelligence, said by phone. Growth in Nigeria and Angola has been “very impressive” while South African chain Checkers has also performed well, he said.

After 159 years, ‘Harrods of SA’ shuts shop

JOHANNESBURG – Department store Stuttafords, the 159-year-old “Harrods of South Africa”, is closing down, a victim of a global shift to online retail and a domestic economic slump that has put brands such as Ted Baker and Gap beyond its customers’ reach.
Mirroring the fortunes of once-mighty department stores in Europe and the United States, the doyenne of the South African high street during apartheid and the two decades since applied for protection from creditors in October.
However, attempts to revive its fortunes proved futile and creditors voted in June to wind up the unlisted firm by 1 August, with closing-down sales at its nine stores in South Africa, two in Botswana and one in Namibia.
In its flagship store in Johannesburg’s Sandton financial district, piles of naked mannequins lay in heaps next to bare shelves as the last few bargain hunters picked through trays of heavily discounted perfumes, make-up and clothes.
“We don’t know what’s going to happen – if we will still have jobs,” said one employee, who did not want to be named for fear of hurting her chances of staying on. “We only heard that maybe this shop will be one that will not close.”
Listen to the interview in the audio below (and/or scroll down for quotes from it).
For South Africa, it is the end of a piece of retail history.
The first shop was opened in Cape Town in 1858 by Samson Rickard Stuttaford with the vision of creating a Harrods-like department store in what was then Britain’s Cape Colony.
Its main Cape Town store, opened in 1938, was designed by in-house Harrods architect Louis David Blanc and echoed the British store’s famous frontage in London’s exclusive Knightsbridge district.
Through various changes of ownership, it never lost its focus on the middle and upper-class South African market, despite the economy’s failure to recover fully from a deep recession in 2009 sparked by the global financial crisis.
Chief Executive Robert Amoils could not be reached for comment but has defended his approach to the tough conditions.
“I believe the path we set was correct,” he told business website Fin24. “We ran out of time. The market downturn was so swift, so severe.”
John Evans, a lawyer overseeing its closure, said he had received a last-minute approach that could salvage two Johannesburg outlets, in Sandton and Eastgate, which would save the jobs of 300 of the group’s 950 staff.
“There’s a chance we’ll save Sandton and Eastgate. If we do, we should be able to save 300 jobs,” he said.
Nearly all retailers in Africa’s most sophisticated economy have struggled as consumer sentiment has hit multi-year lows, a result of high unemployment and inflation gnawing at disposable income. The economy is now back in recession.
The slump is piling pressure on President Jacob Zuma, who faces increasing calls to resign due to a slew of corruption scandals and accusations of mishandling the economy.
Macy’s and Nordstrom in the United States have also hit tough times, suggesting Stuttafords’ woes are not unique to South Africa, Sasha Naryshkine of local asset manager Vestact said.
The main squeeze has come from cheaper retailers such as South Africa’s Woolworths, Sweden’s H&M and Spain’s Zara.
“The fall from grace in all these department stores is that people can get the same stuff online and there is a rise of other quality brands at a cheaper price,” Naryshkine said. “In an economic downturn, people are going to shop down.”
Nor is Stuttafords alone.
Footwear and accessories chain Nine West, owned by US buyout firm Sycamore Partners, and Spanish fashion chain Mango, whose local licences are held by House of Busby, have closed stand-alone outlets due to poor sales.
“The brands did not meet the required return on invested capital hurdles,” House of Busby Chief Executive Mark Sardi said.
Edcon’s Edgars, another clothing retailer ubiquitous in South African shopping malls, was taken over by creditors last year and had to restructure debt.
In May, no-frills retailer Mr Price posted its first annual drop in profits in 16 years, while rivals Woolworths and Truworths flagged lower or stalling earnings last week.

H&M to open six more stores in SA

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:

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)
• DonnaClaire
• Fabiani
• Foschini
• G‑Star Raw (stores already in Australia)
• Markham
• Next
• Phase Eight
• SODA Bloc
• Duesouth
• Sportscene
• Totalsports
• Exact
• The FIX
• @home
• @homelivingspace
• American Swiss
• Mat & May
• Sterns
• hi
SmartCompany contacted TFG but did not receive a response prior to publication.

South Africa’s Mr Price posts first annual profit drop in 16 years

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.

Edcon shuts stores in bid to save sales

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.

Mall of Africa celebrates 1st birthday

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. 

Pick n Pay slashes Smart Shopper rewards

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.

H&M sales rise in SA bad news for local retailers

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”.

Busby to shut Nine West and Mango

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 Product of the Year winners revealed

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. 
Winners list

Based on the independently verified feedback of the 5,000 consumers surveyed, the most innovative products of the year for 2017 are:
Category Winner

Baby care Epi-max Baby & Junior Range

Beverages Fuze Tea

Biscuits Bakers Eet-Sum-Mor Chocolate Chip

Breakfast White Star Instant Maize Porridge

Chips Doritos

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.

Africa retail giants Steinhoff, Shoprite shelve merger

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 opens in Cape Town first store in South Africa

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.

Dis-Chem turnover fails to move investors

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.”

New boss vows to overhaul Edcon

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.”

Shoprite profits come roaring in

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 Africa’s Steinhoff and Shoprite to form retail giant

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 rebel

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.

Mr Price reports first drop in profit in 15 years as economy sours

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 Retailers Slump as Woolworths Clothing Sales Drop

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.

Groupon South Africa is dead: here’s what will happen to your orders

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”.

Truworths shares dive on downbeat sales update

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.

Despite Oversupply Perceptions, South African Malls Are Getting Bigger

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 Helm

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

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

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 acquires children’s clothing retailer Keedo

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.

Africa’s first mega mall in Menlyn Park

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.”
About Starbucks

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 and

R1 billion Thavhani Mall to open next year (South Africa) 

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 Falls Most Since January as Company Warns on Profit

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 debuts in South Africa with first store in Johannesburg

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

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 

Starbucks to open at Menlyn Maine

“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.

Pick ‘n Pay fails to comply with clean energy programme

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.

South Africa’s Steinhoff buys 23% of Poundland

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.

The Foschini Group has big growth plans

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.

Clicks to manage Netcare’s Medicross pharmacies

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.

Mr Price raises sales amid weak economy

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.
Bigger dividend

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.
Other stores

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.