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Industry News

South African & East African Footwear and Leather Goods, Leather and PPE industry news.

American Clothing/The Vault: Started with a bang, now more of a whimper

Published: 25th May 2020
Author: Kamlesh Chagan

Germiston, Gauteng, SA – Since restarting earlier this month, the first week started off with a good buzz, with customers eager to shop after the long recess of lockdown with all clothing stores closed. The past 2 weeks have been slow to quiet. We are far off from our usual trading patterns.
       We have taken the required steps with both staff and customers to take temperature, sanitise, compulsory mask at the entrance and installed Perspex screens at all checkout points of all our stores.
       We usually carry a wide selection of winter apparel and footwear, [so restriction of types of merchandise is] not too much of a issue.
       We have looked at our order book and have cancelled and amended future orders. - Independent, 4 stores. Sport fashion.

Bresan Footwear: Covering costs main priority now

Published: 25th May 2020
Author: Alistair Watt; Member; Bresan Footwear

Pietermaritzburg, KZN, SA – We started up after 2 days of preparing our factory to comply with the new OHS Act. It has been a hectic 2 weeks and the exact number of employees we are permitted to have on site has been a bit confusing. We have been operating with 30% of our staff for the past 2 weeks, which has not been financially viable at all. I have erred on the side of caution to avoid any further run-ins with the law, but following last week's email from SAFLEC and the DTI we are now starting to move up to 50% staff for the CMT of safety boots. One of our biggest challenges at the moment is trying to do staff rotation, which is very difficult given the skill sets required to achieve outputs. At these low levels we have started with our multi-skilled operators so we can move people around and are now in the process of bringing in the lesser skilled to increase outputs. We currently have some staff working a 3-day week, some working a 2-day week and key staff working a 5-day week. We are looking at ways to rotate further staff, but skill is a major issue and as time moves on we will be calling in more staff on a rotational basis. However we have to be very mindful that staff rotation leads to quality problems and that is something that we can ill afford at this moment in time. Adding further to our skills challenge is that we have a number of very good operators who have health issues which make them high risk and thus unable to return to work at the moment. It is far from ideal but being able to produce enough to cover costs is our main priority at present, profit is something we don’t intend to see for many months to come.
       On the CMT side, we have a lot of work in process, with nothing being cancelled to my knowledge. We are under a lot of pressure to get CMT work out, but with our current staff complement we are only producing around 650 pairs per day, which is way off our normal target. Starting this week, with the additional staff, we are hoping to increase that up to around 900 pairs per day. Our shoe making side is a mixed bag. We have had a number of cancelations but more requests to delay delivery to later in the year. We haven’t started our shoe making side yet due to the AL4 restrictions and not wanting to have too many staff in the factory at any given time, but in the weeks ahead we are going to have to consider some sort of rotation to satisfy the few customer orders we have.
       At this stage we haven’t experienced any staff refusing to return to work. We have had a few raising concerns over people coming from areas which are rumoured to contain Covid19 outbreaks. I am not sure if the rumours around these areas are true, but it is a very concerning situation. For now all we can do is follow the OHS protocols to reduce employee risk. - Men's casual footwear manufacturer and CMT safety footwear upper manufacturer

Tarzan Shoe Factory: Workers refuse to return

Published: 25th May 2020
Author: John Olde-Olthof; MD;Tarzan Shoe Factory

Tulbagh, W Cape, SA – To answer you, for what it is worth;

1. We got permit for L5, workers refused to start, they told me, they not interested to return to work, if not all workers are allowed to work at once! Took me more than a week, to get the essential workers in the factory.

2. At the moment, my workers refuse to work. They first want all their Ters money!  We would like to work……

3. Had some cancellations, also got some nice new orders. Biggest problem is, we don’t work, customers will cancel more orders, due to us not being able to deliver.

4. 90%  refuses to work, demanding  all their Ters money…. - Outdoor stitchdown and stuck-on leather footwear manufacturer

Massmart: Covid-19

Published: 25th May 2020
Author: Stock Exchange News Service (SENS)

Johannesburg, Gauteng, SA (May 18, 2020) – Shareholders are referred to the SENS announcement issued on 30 March 2020 which provided an update of the impact of the Covid-19 national lockdown on the Massmart Group. As previously reported, Massmart supports the measures the South African Government has outlined to contain the spread of the Covid-19 virus. In line with regulations and amendments as published, the following Massmart formats were registered with the Department of Trade and Industry (“DTI”) to enable trading activity during the level 5 lockdown period: Makro, Wholesale Cash & Carry stores, Game, Shield Buying Group, Rhino and Cambridge Food.
       Whilst the above formats continued trading during this period, trading was restricted to essential goods. Consequently, Game and Makro did not trade in general merchandise, save for those categories falling under the definition of basic and essential goods. No alcoholic or tobacco products were sold and our South African Builders stores were not permitted to trade in accordance with the regulations. Likewise, our non-essential product distribution network and our home and regional offices were closed with almost all of our regional and home office associates working remotely.
       Whilst we initially planned for a 21-day level 5 lockdown period, we developed in an abundance of caution robust contingency plans and procedures in the event that this period was extended. We were therefore well positioned and prepared when the level 5 lockdown was extended to a period of 5 weeks, ending on 1 May 2020. Massmart pro-actively engaged with the DTI on additional products to be authorized for trade, particularly where these supported and facilitated the government’s objective of encouraging home confinement including “work-from-home” and “school-from-home”. We were therefore pleased to note the inclusion of these product categories in the amended Level 5 regulations that came into effect in mid-April. Similarly, we were also pleased to be authorized to open selected Builders stores to trade with essential service providers during the last week of the level 5 lockdown, with supplies being limited to those needed in the execution of emergency and essential repairs and maintenance.
       Notwithstanding these developments, Massmart was unable to trade in the majority of general merchandise, home improvement and liquor products for most of April. These untradeable product categories represent a significant portion of our overall merchandise offering. The contribution of these product categories to sales in the 2019 financial year was as follows: General Merchandise (26%), Liquor (15%) and Home Improvement (15%). Given the high level of contribution of these categories to total sales, April Covid-19 sales were significantly lower than would be the case under normal trading conditions.

Sales update for 13 week period ended: As previously reported, for the 13-week period ended 29 March 2020, total sales increased by 1.3% over the prior year, with comparable store sales increasing by 0.9% over the same period. As mentioned, the Covid-19 lockdown had a significant impact on normal trading patterns. Consequently, total sales for the 19 weeks ended 10 May 2020 amounted to R28.2 billion, and were 11.9% lower than the same period last year. Comparable store sales were 12.1% lower than last year. Sales from our South African stores amounted to R25.3 billion, 13.1% lower than last year, with comparable store sales decreasing by 13.2%. Total sales from our ex-South Africa stores amounted to R2.9 billion, 1.3% higher than last year, with comparable stores decreasing by 0.3%. Liquidity and cash flow management: The intensified pressure resulting from extended Covid-19 trading restrictions increased the daily focus on liquidity and cash flow management. Massmart has a strong balance sheet and based on our cash flow forecasts, has sufficient cash facilities and resources to meet its obligations.
       In line with good financial practice, Massmart continued to focus on prudent cash flow management and initiatives to improve cash generation performance. These included initiatives to negotiate rental reductions and improved, mutually beneficial terms with strategic suppliers. We were fortunate that most of these interventions were in-flight and publically confirmed prior to the onset of the lockdown. Massmart has met all payment obligations throughout the lockdown period and has continued to pay all employees in full. We will continue to proactively work with all suppliers and stakeholders to manage our cash position going forward including:
*Negotiating and participating in the rental relief package from the Property Industry Group;
*Vendor engagement sessions to negotiate mutually beneficial commercial terms with key suppliers (to date we have engaged with ± 67% of our trade spend base);
*Engaging with the South African Revenue Services to obtain outstanding VAT and Income Tax refunds;
*Applying for available Employee Tax Incentive relief measures such as Temporary Employment and Relief Scheme and Skills Development Levy relief;
*Sensibly Reducing Capex for the full year; and
*Aggressively pursuing cost reduction initiatives as already outlined in our turnaround plan

Massmart's current focus: We remain concerned with regard to the impact of a prolonged lockdown and limited trading environment on the South African economy and population. We take pride in our responsibility as an essential services provider and our ability to provide South Africans with food, basic and essential goods during this period. We remain focused on ensuring a safe operating environment for our customers and associates, and have implemented various measures and initiatives in order to achieve this. These include measures to ensure our associates can travel safely to and from work on a daily basis, and introducing daily associate and customer screening. We have taken steps to optimise the supply of food, basic and essential goods and ensuring the availability of these products in-store, while our online platforms are processing and fulfilling customer orders of basic and essential goods. All other online orders will be processed for delivery once the appropriate lockdown level allows for this.
       The factors impacting financial performance remain fluid and adds complexity to short term forecasting. Updated information will be provided to shareholders once there is a reasonable degree of certainty around financial performance.

Richemont: €2 billion denominated bond

Published: 25th May 2020
Author: Stock Exchange News Service (SENS)

Bellevue, Switzerland (May 19, 2020) – Richemont announced that it has successfully placed a Euro denominated bond transaction with a volume of €2.0 billion.
       The transaction launched on 18 May with three tranches maturing in 2028, 2032 and 2040. The notes are priced with a coupon of 0.750% for the €0.50 billion 8 year maturity note, 1.125% for the €0.85 billion 12 year note and 1.625% for the €0.65 billion 20 year note.
       The notes are expected to receive a rating of A+. S&P Global Ratings recently affirmed the A+ rating of Compagnie Financière Richemont SA and revised the outlook to negative from stable.
       Net proceeds of the notes issued will be used for the Group's general corporate purposes.
       Richemont will make an application for the notes to be listed on the regulated market of the Luxembourg Stock Exchange.

Corporate calendar: The trading update for the first quarter ended 30 June 2020 will be published on Thursday 16 July 2020.

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