Edcon deal will take it to close to 200 stores
Cape Town, W Cape, SA – A lot of things have come together for retailer Footgear in the last 2 months.
       On June 6, Old Mutual Private Equity (OMPE), the direct private equity investing arm of Old Mutual Alternative Investments, announced the acquisition of a majority interest in Footgear, subject to approval by the Competition Commission. On Friday, the commission recommended to the Competition Tribunal that the merger be approved unconditionally.
       On July 15, Footgear announced that it has acquired the Edgars Active and High Key chain stores from Edcon, subject to commission approval.
       CEO Neil Stephens replied to questions from S&V about the Edcon deal:

Does this still have to be approved by the Competition Commission? Yes – as per the press release – not sure of timing unfortunately – but hopeful for completion pre peak Nov/Dec season. We are confident especially from a job preservation perspective as there will be no job losses, and even as a combined entity we are a small percentage of the market.

Are the Edgars Active merchandise and brands similar to Footgear's merchandise and brands? There is good crossover of the brands – the likes of Nike, Adidas, Puma, and Converse, and we are looking forward to working with all our suppliers to develop these relationships further.

Are you taking over 180 stores or will your total now be 180 stores? The combined total will be approximately 180 - 200 stores.

Was this deal motivated by Old Mutual's role as a landlord? No, old Mutual is the landlord in only one location. As per the first press release the OM private equity (OMPE) investment was typical private equity – buying into a successful enterprise with high growth potential. The attraction to us was the OM brand and reputation, as well as their track record in previous private equity transactions (The Pro Shop, Cycle Lab, Tiger Wheel and Tyre, Pep, Ackermans, to mention a few), and of course the availability of capital to pursue our growth ambitions which included Edgars Active.

Do you feel you have taken over intrinsically sound businesses, or do you feel they will need a lot of work? The EA business is very similar to ours from a target market and brands perspective, and the stores are very well located, and a great geographical fit with our existing stores – 95% of their stores are in locations were we are not, thereby giving us an excellent nationwide reach, and they have good people. So we see it as a great opportunity. What is High Key? This comprises of about 8-10 stores within the EA stable recently rebranded “High Key” offering a very different look and feel to the existing EA brand, which we will assess and we could possibly roll out as a separate chain after we have bedded down the first phase.

"It's quiet at the moment. People come in and take a look, but aren't buying much. Maybe it's the time of month. It's more-or-less the same as last year." - David Novos, manager, Economic Shoe Store, Paarl, W Cape, SA. Independent, 1 store, family footwear.

"The week overall has been quiet, but there has been a sudden burst of business this morning. Overall the month hasn't been too bad." - Shireen Ebrahim, director, Economics of Glencoe, Glencoe, KZN, SA. Independent, 1 store, family outfitter.

"Back-to-school is a quiet period for us, so this week has been quiet. The first quarter of the year was definitely slow, and April and May weren't great. June was better than last year, and July will depend on how school holidays fall - we do much better during the holidays." - Mubeen Dhorat, national manager, Eddie's Family Clothing, Pietermaritzburg, KZN, SA. Independent, 4 stores, family outfitter.

"The week started off with a bang because of back-to-school, then tapered off. We're basically on a par with last year so far, and looking forward to Black Friday, Christmas trading and back-to-school again in January. Matatiele has grown a lot, and many of the chains are here, so we've had to up our game, but it's a really lovely place." - Gerald Robins, buyer, Elegant Man, Matatiele, E Cape, SA. Mini-chain, 5 stores, family and school outfitter and sportswear and equipment.

"This week has been terrible, and the month as a whole has been quieter than the rest of the year. I've no idea why - normally I'm very busy on a Friday, but not this week. It's very unpredictable - sometimes I'm busy at month end, sometimes in the middle of the month, but this week, maybe people are fed up or hibernating or something." - Deborah Fontes, director, Elements Boutique, Johannesburg, Gauteng, SA. Independent, 1 store, women's boutique, men's accessories, and vaping accessories.

S&V asked the Industrial Development Corporation to comment on the closure of Cape Town factories in the leather industry. Spokesperson Zama Luthuli responded:
The recent liquidation of Jensen Belts is the fourth leather industry factory in Cape Town to go into liquidation or close in the last 4 or 5 years (the others were Uber Gruvi, Chic, and at the end of last year, Green Cross Manufacturing). All had been, so far as I know, heavily funded by the IDC. Is the current model that the IDC is using to fund footwear and leather goods manufacturing flawed by being too focused on upgrading manufacturing without developing sustainable markets?
IDC’s funding model considers the challenges facing the footwear and leather industry and includes assisting distressed businesses, however continuation of business’ is dependent on management as well as prevailing economic conditions.
The IDC has played a significant role in saving some of the jobs in the industry given the challenging economic environment.
       As you may be aware, consumer discretionary spend has dropped over the last few years and is anticipated to continue declining in the next two to three years. Due to, among other factors, a challenging economic environment, most consumers are prioritizing spend on essential items and/or opting for cheaper imported semi-durable products.
       Please note Jensen Belts and Green Cross did not receive IDC funding. However all companies mentioned received funding from the dti’s Grant Scheme, which is designed to increase competitiveness through improved manufacturing capabilities.
Should the IDC have tighter management control on businesses it is supporting?
Adequate due diligence is always conducted on any successful applicant for a funding facility. While we do keep a close watch and monitor performance of beneficiaries, we do not normally acquire equity in these businesses to influence their operations. As indicated, the challenging economic environment has largely impacted this industry.
Is there any news on Celrose and its footwear division, Eddels Shoes, and when (or if) the IDC plans to sell its share?
As you are aware, we just recently acquired Celrose. We remain a committed shareholder with absolutely no immediate plans to divest from the business.

Thu 11 Jul 2019, 9:15 Woolies - extracts from a SENS trading update
The year ended 30 June 2019 ('current year') had 53 trading weeks compared to 52 trading weeks for the year ended 24 June 2018 ('prior year').
       In South Africa, after a 2.0% decline in sales in the first half, Woolworths Fashion, Beauty and Home sales performance improved in the second half, growing by 5.5% (5.0% after adjusting for the pre- Christmas trade day included in the second half), with comparable sales of 4.7%. This is as a result of a focus on core ranges and basics, backed by improved availability. Price movement for the year for Fashion was 2.5%.
       Retail trading conditions in Australia remain challenging. David Jones was also significantly impacted by sales disruption resulting from the Elizabeth Street store refurbishment, which is on track to be completed by the third quarter of the 2020 financial year. Online sales at David Jones grew by 46.8%, and now contribute 7.7% of total sales. In Country Road Group, while sales growth in the second half was also impacted by the trading conditions, online sales in Australasia grew by 12.9%, representing 20.3% of sales. As the contribution from online sales increases the reduction in unproductive space remains a priority.
       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.- For the full report, go to http://www.sharedata.co.za/v2/Scripts/News.aspx?c=WHL&sensid=339036

"It's been a bit quiet because of school holidays - a lot of our clients go away. We're a destination store both on the shoe repair side, where we are known for quality repairs, and on the comfort footwear side, where we sell branded men's and women's footwear. Our business is more-or-less evenly split between those divisions. The year so far has been quiet. People hold on to their money in uncertain times." - Dipak Parbhoo, member, Durasole, Cape Town, W Cape, SA. Independent, 1 store.

"Not bad. I'm happy with trading this week. The year so far has been tough. You have to box clever." - Shiraaz Mohamed, director, Ebbie's Fashion House, Kimberley, N Cape, SA. Independent, 1 store, men's outfitter.

"From November last year to May there were strikes on the mines, which affected trade. Since June, business has definitely picked up. Winter hasn't been strong because of the warm weather. By the time it got cold, the chains had put their winter merchandise on sale, which doesn't help us." - Mohammed Hoosen Laher, proprietor, Textile Wholesalers, t/a Best Shop, Ebony, M&H and Melz, Carletonville, NW Province, SA. Mini-chain, 6 stores, family footwear.

"It's been a bit quiet this week because of school holidays, and overall it hasn't been good for a couple of years. It's quiet, but it's not disastrous." - Muhammad Seedat, member, Ebsons, Johannesburg, Gauteng, SA. Independent, 4 stores, family footwear and schoolwear specialist.

"It's not what it was years ago, but we're paying our expenses and making a living." - Faizal Hajat, member, Economic Outfitters, Johannesburg, Gauteng, SA. Independent, 1 store, men's outfitter and schoolwear specialist.