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Robby Stoller... Focusing on essentials only

Q&A: Stocks, the exchange rate and future orders

Published: 13th May 2020
Author: Tony Dickson - S&V Editor
Dangee Carken: Perhaps this will be the catalyst for change
Robby Stoller, MD. Johannesburg, Gauteng, SA
- Retailing is restricted to winter footwear. Do you have stock which you believe would qualify?
Of course we qualify. We have brought in boots and closed footwear for the winter season. Most of our stock has been delivered to the trade as well as more still to be delivered. We will be working with our retailers to manage the flow of stock over the rest of the season.
- The exchange rate has worsened dramatically over this period. Why do you think that is?
I guess it’s all about risk, the downgrade happened as expected – the timing however could not have been worse. The government needs to implement its reform measures and not pay lip service to it. Maybe this catastrophe will be the final catalyst for change. I can only hope and pray that it is.
- Do you believe the exchange rate will improve when the lockdown is reduced to the stage where importing can resume?
I don’t know. I expect it will remain at these levels, the weakness was priced in already  - prior to the downgrade. Only once we see the stimulus package taking effect will we maybe see it strengthening again. We are quite a while off until we see it coming back to previous levels, if ever. I guess it will be the new normal.
If it doesn't improve at all, or not to where it was before the lockdown, can you quantify the effect on footwear imports, and what importers will have to do?
It will have a dramatic effect, especially on men’s footwear. We will trade largely on what stock we have. Fortunately we did a massive clean-up of old stock last year and have brought in only new and “fashion relevant” stock into our warehouse. If we bring in more we will focus on the fashion essentials. Ladies is different though as it's seasonal, but once again it will be scaled to minimums, as the risk of suppressed turnover will be real. I am relying on our ability to be read the fashion as the “feel good factor” will be even more relevant than ever. 
Have you cancelled orders, placed orders, or put everything on hold?
I have put everything on hold until we get back. We will have to assess the volume and risk and then make decisions on what to bring in. We are fortunate to have presented and sold most of our summer already. The factories are waiting for the go-ahead. However, we will have to re-cost and renegotiate deliveries and payment for the rest of the year, both with our supply chain and retailers. We will be implementing fundamental changes to our company, it will not be business as usual.
 
 
 

Laurence Lotzoff... Everyone has some exposure to exchange rate

Dale Footwear: Everyone will be affected
Laurence Lotzoff, MD. Johannesburg, Gauteng, SA
- Retailing is restricted to winter footwear. Do you have stock which you believe would qualify?
We absolutely do. We received stock before shut down and while we were able to get much of it out in the normal course of business, we still have additional top up stock and decent stocks of our core lines as usual.
- The exchange rate has worsened dramatically over this period. Why do you think that is?
Finally economics classes paying off … it’s a combination of things – the eventual Moody’s downgrade although much was priced into the currency already, risk aversion in the global investment community, poor local economics coupled with a widening budget deficit and bigger borrowing as a percentage of GDP, the lowering of the repo rate lessened the demand for interest rate arbitrage investing albeit the returns are still quite attractive, lower production of the metals groups during the lockdown lowers our export revenue, I really could go on .. 
- Do you believe the exchange rate will improve when the lockdown is reduced to the stage where importing can resume?
There are so many factors influencing the forex rate that if it isn’t one thing, it’s another. Sadly, unless the SARB pushes the repo rate to say 15-20%, which will make investing into ZAR much more attractive, I think there are too many things beyond our control in SA to influence the exchange rate and too much depends on what the US does, or doesn’t do. The US$ is the main safe haven other than gold so even with negative returns, investors would rather park their cash there to retain some form of value. That is where the demand for the US$ will remain and until investors see reason to move to other asset classes or currencies, the US$ will be king.
If it doesn't improve at all, or not to where it was before the lockdown, can you quantify the effect on footwear imports, and what importers will have to do?
There is no single answer to that as it really depends on what people have done/do do in the normal course of business with regards to buying forward cover. Everyone will be affected differently and everyone will have some level of exposure.
Have you cancelled orders, placed orders, or put everything on hold?
We had placed all our orders before the lockdown for S’20 but we have relationships with some suppliers going back over 20 years so they have been flexible in receiving minor amendments to the March orders. It definitely helped that factories in Italy, Brazil, India, Pakistan, Thailand and even some in China have been closed during most of the period we have been through, so not much work has been done with regards to making the shoes.
 
 
 
Crown Footwear Group: Local manufacturing may become more attractive
Jeremy Nel, brand manager. Pinetown, KZN, SA 
- Retailing is restricted to winter footwear. Do you have stock which you believe would qualify?
Yes, we have winter footwear.
- The exchange rate has worsened dramatically over this period. Why do you think that is?
I could give you many, many reasons, but not a definitive answer.
- Do you believe the exchange rate will improve when the lockdown is reduced to the stage where importing can resume?
I sincerely hope the exchange rate improves although I believe it will be over a longer period.
If it doesn't improve at all, or not to where it was before the lockdown, can you quantify the effect on footwear imports, and what importers will have to do?
Without doubt there will be a 20-25% increase in price on imports and local manufacturing will become more appealing.
Have you cancelled orders, placed orders, or put everything on hold?
We have made decisions in the best interest of our business and business partners by working closely together and planning ahead.
 
 
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