S&V Weekly Newsletter Vol.5 No.23, June 10, 2019

This Newsletter is sponsored by SAFLIA

LET'S MAKE 2019 A REALLY GOOD YEAR!

Please note: Click on any ad to go to the advertiser’s website

Retail last week

Comment from 3 retailers on Saturday
"Better than previous weeks, and June, so far, has been much better than May. People are spending right now, where in April and May people were much more cautious with their spending. Things seemed to have settled down a bit since the elections." - Hetesh Daya, director, Daya & Sons Tailors & Outfitters, Durban, KZN, SA. Independent, 1 store, men's outfitter.

"June has been picking up slightly, so it's better than it was, but by no means good. You never know what the next week will bring." - Hashik Dullabh, member, Delbro Premium, Port Elizabeth, E Cape, SA. Independent, 1 store, men's outfitter specialising in premium formal brands.

"It's been pretty good, but we've still got a long way to go after several bad months. However, I do feel there are signs of a turnaround." - Roger Miller, member, Drakes & Pakwells Luggage Group, Pretoria, Gauteng, SA. Independent, 4 stores, travel and leather goods.

Green Cross factory closure

Green Cross: SACTWU threat probably empty, but footwear a poor performer in AVI stable

Cape Town, W Cape, SA – The threat by SACTWU to approach the Competition authorities to have the 2012 purchase of Green Cross Manufacturers (Pty) Ltd, Green Cross Properties (Pty) Ltd and Green Cross Retail Holdings (Pty) Ltd by AVI Ltd reversed, appears to be empty.
       In a release on May 24 headlined JSE-Listed Conglomerate, AVI, Slaps The Face of Ramaphosa’s Jobs Summit – May Be Forced To Undo 7-Year Old Merger, it said AVI "may have breached commitments it made to the Competition Tribunal".
       At the time of the hearings, SACTWU made a late submission "proposing that the Commission either approves the merger with conditions or altogether prohibits it", according to the Tribunal's judgment. SACTWU had argued that "AVI lacked commitment regarding local manufacturing in South Africa and focused more on brand development", read the judgment. "The union was concerned that for this reason the manufacturing business of Green Cross would be curtailed and would be substituted by imports, which they alleged would affect the employment conditions and stability in Green Cross."
       AVI and Green Cross said that SACTWU represented only 15 of the factory's 426 employees, most of whom were represented by NULAW, which had not objected to the merger, but the Tribunal said that was irrelevant.
       "...the level of representation does not alter the concerns if they are legitimate," the Tribunal wrote. "Unfortunately, SACTWU chose to give only written representations and did not attend the hearing. In these written submissions, the union alleged that AVI's manufacturing focus is on fast moving consumer goods (FMCGs). Where it has historically had manufacturing interests in non-FMCGs it has, as it put it, 'discarded' these investments. The union included examples as to where AVI had 'discarded' manufacturing interests in the past, such as Consol Ltd, a bottle manufacturer. (These examples include clothing manufacturer Pastel, fabric knitting mill Team Puma, spinning, dyeing and weaving mill SA Fine Worsted, home-textile manufacturer Mooi River Textiles and technical textile mill Gelvenor).
       "However, it did not provide any evidence that AVI was intending to close or curtail current manufacturing at Green Cross. AVI has denied that it well retrench employees as a result of the merger, and there is no evidence from the filings which contain AVI's business plans for Green Cross that it will. AVI also stated at the hearing that the examples of past actions by the firm relied on by SACTWU to support its argument that the firm was likely to curtail manufacturing were inaccurate and wrong.
       "We therefore have no evidence to rely upon to reject the merging parties' version that the merger will not lead to retrenchments in manufacturing that may be merger specific...Accordingly, we approve the proposed merger unconditionally."
       A source close to Green Cross said while AVI may have made poor decisions regarding the factory, including having 4 MDs in 6 years, "and getting rid of people who knew how the business operated", it had invested heavily in the factory, which at the time of the takeover supplied around half of the retail and wholesale divisions' footwear.
       In response to a query from S&V regarding the SACTWU threat, AVI responded:
       "Following full and proper consultation with employees, Green Cross has stopped manufacturing operations at its facility in Epping, Cape Town. This follows a detailed review of options available to restore the business to sustainable profitability that concluded that it is not possible for Green Cross to successfully compete and grow in the highly competitive comfort footwear market continuing with the current operating model that relies on a significant volume of local manufacture.
       "Notwithstanding material investment in its manufacturing facility, production volumes have declined to sub-economic levels resulting in significant under-recovery of costs that make it impossible for Green Cross to achieve a sustainable level of profitability. Green Cross trades in a highly competitive segment of the footwear market that is supplied mostly by imported product, and management believe that it is necessary to migrate to a full import operating model to protect the wholesale and retail businesses."
       It has not said why it chose to close the factory rather than selling it.
       In its results for the 6 months to December 31, 2018, published on March 11, footwear and apparel was the worst performing division in the AVI stable, both in revenue and operating profit. Below are extracts from that report:

Revenue in the Footwear and Apparel category decreased by 9,2% to R1,14 billion while operating profit decreased by 20,9% from R342,4 million to R270,8 million. The operating profit margin decreased from 27,3% to 23,8%.
       The Spitz business saw revenue decline by 7,8% due largely to an 8,2% drop in footwear sales volumes. Selling prices of core ranges have not been increased since April 2016, however consumer demand was subdued and the business was not able to repeat last year's record December sales performance. Gross profit margin was maintained in line with last year and selling and administrative expenses increased by only 1,3%, however the lower volumes and consequent decline in gross profit resulted in a 15,4% decrease in operating profit, from R334,6 million to R283,1 million. The operating profit margin decreased from 32,3% to 29,7%.
       Green Cross revenue decreased by 20,4% largely due to lower sales volumes. Sales volumes were impacted by soft demand and widespread discounting in the mid-price comfort footwear segment, exacerbated by poor performance of the summer range in retail doors. Fixed costs were tightly managed and decreased compared to last year, before taking restructuring costs into account. In November Green Cross embarked on a consultation process with affected employees following an in-principle decision to stop all manufacturing operations at its facility in Epping, Cape Town. Restructuring provisions of approximately R15 million have been included in the first half result pending finalisation of the consultation process.
       Including these costs, Green Cross recorded an operating loss of R18,8 million compared to a profit of R4,4 million last year. Cash flow for the period was positive due mainly to a further reduction in stock levels.

They Said It

"I learnt a while ago that you can't be half pregnant." - Former Green Cross Manufacturers shareholder Gunter Zeppel on why he hadn't tried to keep tabs on the footwear industry following the sale of the business to AVI in 2012. He declined to comment on the closure of the factory this year.

"Saying of the Week: Run when You Can, Walk if You have to, Crawl if You must, Just Never Give Up! Like Liverpool. Never Give Up! YNWA. Impossible is Nothing!" - Part of a much longer message from retailer Bilkish Mather, owner of Connections in Durban's Workshop. It took me a while to decipher YNWA. Of course, it's all just hot air to us Man City fans...

Move

Johannesburg, Gauteng, SA – 1721 Distributors (Pty) Ltd, distributor of Fila and Levi's, has moved offices from Selby to 25 Scott Street, Waverley. The phone number remains +27 (0)11 630 400.

S&V Directory - Order now

The directory is ready. On sale for R450. The online version is also available at R450 for 12 months' access.

2019 Trade Fairs Another essential service from S&V

Please note that we have put a list of the 2019 trade fairs and conferences on our website, linked to their websites: http://www.svmag.co.za/events

Exchange rates

Source: http://www.x-rates.com/calculator/

ABSA Agri Trends 31/05: Hides & skins prices

Bovine hides R1.74/kg. NB* Hide prices are determined by the average of the RMAA (Red Meat Abattoir Association) and independent companies. Sheep skins: Dorper skins R48.75/skin.

10/06/1951: Marthus Louw, retired, formerly Bolton Footwear, Great Brak River.
10/06/1954: Dave Moss, Sneakers International, Durban.
10/06/1955: Piet Kleyn, acting CEO, SA Ostrich Business Chamber and chairman, KL Ltd board, Oudtshoorn.
10/06/1961: Richard Turner, emigrated, formerly Bolton Footwear, Great Brak River.
10/06/1983: Jarod Grossberg, G-Step, Durban.
11/06/1948: Basie Vermaak, retired, formerly Watson Shoes, Great Brak River.
11/06/1961: Andy Raouna, left the industry, formerly Multiserv, Johannesburg.
12/06/1954: Frieda Maisey, left the industry, formerly Brondean Agencies, Port Elizabeth.
13/06/1943: Peter Book, retired, formerly Woodheads, Cape Town.
13/06/1950: Maria Caldeira, Solemates, East Rand.
13/06/1966: Benedict Plaatjies, Leather from Hart, Pietermaritzburg.
13/06/1974: Stuart Worrall, Elan-Polo, Cape Town.
14/06/1931: Malcolm Hill, retired, formerly Bata SA/Beier Footwear, Pinetown.
14/06/1952: Terry Holton, ACA Threads, Gauteng.
14/06/1969: Alison Piccione, KMP Footwear, Pinetown.
14/06/1963: Niekie Vermaak, KKI Leather Marketing, Oudtshoorn.
14/06/1965: Beverley Riley, Brits Leather Products, Brits.
14/06/1965: Allan Kisten, Spunlok, Pinetown.
15/06/1945: James Cragg, agent, East London.
16/06/1945: Yusuf Kadwa, May’s Shoes, Durban.
16/06/1963: Deepak Dayal, Deluxe Footwear, Durban.
16/06/1965: Tersia Wessels, retired, formerly Crocs SA, Somerset West.
16/06/1973: Sue Meehan, left the industry, formerly Mantella Q Leather, Durban.
16/06/1985: Chris Stottelaar, Leather Systems, Port Elizabeth.
16/06/1960: Jaywant Irkhede, the DTI, Pretoria.

In Memoriam this week

12/06/2004: Neville Williams (b. 04/1945), Cameo Components/Central Components [closed], Pinetown.
17/06/1994: Roy Inggs (b. 18/06/1932), Inggs Shoe Stores [closed], Roodepoort/Florida.

Have you let us know about your birthday, or the birthdays of your colleagues? Our readers love this section, so please become part of it. This also applies to the In Memoriam section. Help us remember former colleagues.

Have a look at these links

We invite businesses to send us links to websites, Facebook pages and the like which they feel would be of interest to others. The links below are from our database:
Atlantic Protective Clothing, PPE reseller, Johannesburg, Gauteng, SA: http://www.atlanticprotective.co.za/
Atlantic Surf Co., beach wear specialist retailer, Cape Town, W Cape, SA: http://www.atlanticsurfco.co.za/

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Contact us

News & Classifieds: Tony Dickson, +27 (0)31 209 7505, tony@svmag.co.za

Next newsletter: June 17, 2019.

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