Footwear Industry News
Competition Tribunal approves Footgear takeover
Pretoria, Gauteng, SA – The Tribunal has approved the merger in terms of which OMPE GP IV (Pty) Ltd (in its capacity as a partner of OMPE Fund) intends to acquire control in Footgear Holdings (Pty) Ltd.
OMPE Fund controls MoreCorp which is active in the retail for the provision of golf and cycling footwear, whereas Footgear is a retailer of general and casual footwear.
The Commission, in its assessment of the merger, concluded that no competition or public interests concerns arise from this merger.
Steinhoff Investment - Pepkor trading update
This is an extract from the report.
Cape Town, W Cape, SA (August 7, 2019) – Pepkor increased revenue by 8.5% to R53.1 billion for the nine months ended 30 June 2019. Performance was supported by a stronger third quarter which saw revenue grow by 11.7%, largely benefitting from the shift of Easter to April. Trading however, remains volatile in an environment of continued pressure on consumer spending.
Clothing & general merchandise
The clothing and general merchandise segment reported revenue growth of 6.4% for the nine- month period, supported by 9.2% growth during the third quarter.
For the nine-month period, the Pep and Ackermans brands in aggregate reported sales growth of 6.7% and like-for-like sales growth of 2.9%. Retail space expanded by 4.8% year-on- year. Core clothing, footwear and homeware (CFH) product categories achieved 7.1% sales growth and 3.5% like-for-like growth. This remains encouraging in the current operating environment. Pep and Ackermans in aggregate reported inflation of 4.2% in CFH retail selling prices. Pep Africa reported a decline in sales of 0.7% in rand terms for the nine-period. This includes strong constant currency performance with sales growth of 14.9% and like-for-like growth of 11.4%. Good results were achieved in most countries while macro-economic challenges in Zimbabwe continue to impact performance.
The Speciality division reported sales growth of 9.5% with like-for-like growth of 4.2%, in aggregate, for the nine-month period. Satisfactory performance was achieved in the clothing product categories with continued softer performance in footwear.
Pepkor's defensive market position and strategy of providing customers with value at affordable prices continues to resonate with customers, as demonstrated through continued market share growth. This will continue to support performance in challenging operating conditions where sales volatility is expected to continue as customers have to contend with high levels of unemployment and increased cost of living in what remains to be an extremely challenging retail environment.
Impact of Pepkor group's pro forma constant currency disclosure
The Pepkor group discloses unaudited constant currency information to indicate Pep Africa's performance in terms of sales growth, excluding the effect of foreign currency fluctuations. To present this information, current period turnover for Pep Africa reported in currencies other than ZAR are converted from local currency actuals into ZAR at the prior year's actual average exchange rates. The table below sets out the percentage change in sales, based on the actual results for the period, in reported currency and constant currency for the basket of currencies in which Pep Africa operates.
Retail last week: Comment from 5 retailers on Saturday 03/08/2019
"It's been okay, not too bad. The last 7 months have been tough, with weekends and month ends okay. Hopefully with Christmas coming up it will improve. We're giving it our best shot." - Sunil Valla, director, Famous Barr, Middelburg, Mpumalanga, SA. Independent, 3 stores, men's outfitter.
"It's been good. We've had quite a bit of Hajj trade, and they need specific sandals which expose the metatarsals. The year overall hasn't been as good as last year. Part of it is that the brands aren't holding as much stock as they were, and there are fewer specials." - Imran Lockhat, member, Famous Shoes, Durban, KZN, SA. Independent, 1 store, comfort and up-market brand specialist.
"Not too bad. Fashion has dropped around the country, but school wear keeps us going. If you keep your head above water, you're doing well." - Abdul Hajat, member, Fana's Outfitters, Bethlehem, Free State, SA. Independent, 2 stores, men's outfitter and school wear.
"It's been a bit slow, and a bad week because of all the violence between the police and foreign traders. The year so far has been fair." - Farid Noorbhai, proprietor, Farino Footwear, Lenasia, Gauteng, SA. Independent, women's comfort and evening footwear specialist.
"It's been a bit quiet for the past few months. We're in what was known as the heart of the town, but many of our traditional customers now go the mall, and the foreigners who come into town prefer cheaper footwear. Crime in town is also keeping people away. A problem for us is that there aren't other sites for us to move to. There's basically 1 shopping street in Brits, and 1 mall." - Mohammed Cassim, manager, Fashion Bazaar, Brits, NW Province. Independent, 1 store, family footwear and schoolwear.
Woolworths trading statement
Cape Town, W Cape, SA (August 1, 2019) – Shareholders are advised that earnings per share ('EPS'), headline earnings per share ('HEPS') and adjusted diluted HEPS for the 53 weeks ended 30 June 2019 are expected to be within the ranges reflected below:
June 2018 reported (cents): -369.5
June 2019 expected increase/decrease (%): 65.0% to 75.0%
June 2019 expected range (cents): -92.4 to -129.3
June 2018 reported (cents): 346.3
June 2019 expected increase/decrease (%): -3.5% to 1.5%
June 2019 expected range (cents): 334.2 to 351.5
Adjusted diluted HEPS
June 2018 reported (cents): 364.1
June 2019 expected increase/decrease (%): -2.5% to 2.5%
June 2019 expected range (cents): 355.0 to 373.2
EPS reflects a further impairment of the David Jones business. An impairment charge of AUD437.4 million (net of deferred tax) will be recognised at the period end 30 June 2019, reducing the valuation of David Jones to approximately AUD965 million. A strategic review of the David Jones store portfolio has also identified stores with onerous leases resulting in an additional provision of AUD22.4 million at period end.
The impairment reflects the economic headwinds and the accelerating structural changes affecting the Australian retail sector as well as the performance of the business, which has fallen short of expectations. The WHL Board believes that the valuation of David Jones is realistic and reflective of its prospects.
EPS, HEPS and adjusted diluted HEPS for the pro forma 52 weeks ended 23 June 2019 are expected to be within the ranges reflected in the announcement.
The Group manages its retail operations on a 52-week basis and, as a result, a 53rd week is required approximately every six years for realignment. The current year has 53 weeks. To facilitate comparison against the 52-week prior year, financial information for the current year has been presented on a 52 week basis, constituting pro forma information in terms of the JSE Ltd. ('JSE') Listings Requirements.
The pro forma information, which is the responsibility of the Group's directors, has been prepared for illustrative purposes only, and may not fairly present the Group's financial position, changes in equity, cash flows or results of operations.
The information contained in this announcement, including the estimated financial information and pro forma financial information, has not been reviewed or reported on by the Group's external auditors.
The Group's year-end results for the 53-week period ended 30 June 2019 are scheduled to be announced on the SENS on or about 29 August 2019.
Truworths trading statement
Cape Town, W Cape, SA (August 1, 2019) – Retail sales of Truworths International Ltd. (the ‘Group') for the 52-week period ended 30 June 2019 (the ‘current period') increased by 3.7% to R18.6 billion relative to the R18.0 billion reported for the 52-week period ended 1 July 2018 (the ‘prior period').
Account sales comprised 51% (2018: 50%) of Group retail sales for the current period, with account and cash sales increasing by 4.5% and 2.8% respectively, relative to the prior period.
Retail sales for Truworths Africa (being the Group, excluding the UK-based Office segment and comprising mainly of the Truworths businesses in South Africa) increased by 3.1% to R13.5 billion relative to the prior period's R13.1 billion, with account sales increasing by 4.5% and cash sales decreasing by 0.1%. The improvement in the retail sales performance of Truworths Africa in the second half of the current period is encouraging, with retail sales growing by 3.9% relative to the corresponding prior period (first half: growing 2.4%), mainly driven by account retail sales recording an increase of 5.6% in the second half. Account sales comprised 70% of retail sales (2018: 69%). In Truworths Africa, like-for-like store retail sales increased by 0.7% and trading space increased by 1.6% relative to the prior period. Product deflation averaged 0.2% for the current period.
Gross trade receivables in respect of the Truworths Africa debtors book (relating to the Truworths, Identity and YDE businesses) were at R5.9 billion (2018: R5.6 billion) and the number of active accounts increased by 2.6% to 2.7 million. Active account holders able to purchase and overdue balances as a percentage of gross trade receivables were at 83% and 13% respectively. The book remains healthy and continues to perform in line with management's expectations.
Retail sales for the Group's UK-based Office segment decreased in Sterling terms by 0.9% to GBP279 million relative to the prior period's GBP281 million. In Rand terms however, retail sales for Office increased by 5.3% to R5.1 billion. Retail sales in the second half of the current period performed substantially better in Sterling terms, growing at 2.0% compared to a decrease of 3.0% in the first half, as a result of an increase in sales of marked down merchandise. The Office segment continued to show good online performance, with online retail sales growing at 9.8% and comprising nearly 34% of retail sales for the current period. Trading space for the Office segment decreased by 5.2% on the prior period, mainly due to the closure of some House of Fraser concession stores. The continuingly tough trading environment in the UK in the wake of Brexit uncertainty and muted consumer sentiment, combined with the pressure on store-based retailing as consumer spending shifts to online shopping, have impacted the profitability of the Office segment. This has necessitated a re-assessment by management of the carrying value of the Office segment's assets and has resulted in a non-cash impairment charge of GBP97 million (net of deferred tax in relation to trademarks) being raised against the Office intangibles.
Investors are referred to the SENS announcement published on 2 July 2019 with regard to the potential restructuring of Office's debt. Negotiations with the lenders have progressed constructively, and management believes that they will be concluded successfully. At the end of June 2019, net debt amounted to GBP23.5 million (R418 million) for the Office segment and R663 million for the Group. The Group repurchased 3.75 million shares for R266 million during the current period.
Despite the difficulties being faced in the UK, the board remains committed to the transformation of the Office business through several turnaround and restructuring initiatives.
The Group's diluted headline earnings per share (‘HEPS') for the current period, which exclude the impairment of the Office intangibles by definition, are estimated to decrease as follows:
Diluted HEPS range
*Group - 558 cents – 570 cents
Truworths Africa segment - 544 cents – 553 cents
*Office segment - 14 cents – 17 cents
Decrease on prior period
*Group - 7% - 9%
*Truworths Africa segment - 3% - 5%
*Office segment - 59% - 66%
However the Group's earnings per share (‘EPS') for the current period, which include the impairment of the carrying value of the Office segment's intangibles, are estimated will decrease by between 65% and 67% to between 203 cents and 215 cents, relative to the EPS of 615 cents reported for the prior period.
Investors are advised that this trading statement does not constitute an earnings forecast, that the financial information provided herein is the responsibility of the directors, and that such information has neither been reviewed nor reported on by the Group's external auditors. The Group's audited results for the 52-week period ended 30 June 2019 are scheduled for release on or about Thursday, 15 August 2019.