S&V Weekly Newsletter Vol.6 No.04, January 27, 2020

This Newsletter is sponsored by SAFLIA

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Retail so far this year

"I can't say it's been bad. We've just started a sale today until the second of February, so obviously it's picked up for us. But traditionally January and February are quiet for us. We're busiest over Easter, in July and August, and in November and December, when people travel." - Suzanne Abrosie, member, Luggage Corner, Johannesburg, Gauteng, SA. Independent, 1 store, travel goods specialist.

"It's been alright. Since mid-January, we've had our tourists, mainly from Germany and the UK, and I sense that we'll finish on a par with last year. People are more price conscious, even the tourists, who weren't that way before. Being on the tourist route definitely helps. We can see that local people are holding back much more than they were." - Louise Muir, Matthew's Boutique, Logic Lifestyle, Leisure Active Wear, Smart Fashions and Posh, Hermanus, W Cape, SA. Mini-chain, 5 stores, men's and women's outfitters and travel goods.

"It's been terrible. Even school shoes - even though I sell them cheaper than anyone else, people can't afford them." - Mahomed Sibda, partner, Lucky Store/Shoe Nook, Benoni, Gauteng, SA. Independent, family footwear, 1 store.

Stock Exchange News Service (SENS)

AVI - Voluntary trading update

Johannesburg, Gauteng, SA (January 23, 2019) – The semester's trading environment remained difficult with weak consumer spending constraining sales volumes in many of our categories. This was exacerbated by competitor discounting in some categories and the impact of Black Friday, which both diverted consumer spending and constrained December sales. Significant load shedding in early December exacerbated a challenging trading month, particularly for the retail brands.
       Group revenue for the semester was 1,0% higher than for the same period last year. The consolidated gross profit margin was well protected and costs were carefully managed resulting in operating profit being marginally higher than in the same period in the prior year.
       The food and beverage businesses performed well in a difficult environment growing operating profit ahead of inflation. This was offset by decline in the personal care and footwear brands which continued to experience volume pressure in some categories, including weaker sales for Spitz in the material December trading month. Cash flows remained strong through the semester.
       Net finance costs were higher than last year due to higher average borrowing levels notwithstanding lower borrowings at the end of the semester, while earnings from I and
- Consolidated earnings per share for the six months ended 31 December 2019, including capital gains and losses, are expected to increase by between 35,0% and 37,0% over the comparable period in the prior year, translating into an increase from last year's 303,2 cents to a range of between 409 and 415 cents per share.
       It is expected that AVI will release its results for the six months ended 31 December 2019 on or about 9 March 2020.

Pepkor - 3-month trading update

Cape Town, W Cape, SA (January 23, 2019) – The Pepkor group increased revenue from continuing operations by 7.6% to R20.9 billion for the three months ended 31 December 2019.
The clothing, footwear and homeware (CFH) retail brands successfully defended and expanded their market shares, according to the latest RLC data.

Continuing operations
Clothing & general merchandise
The clothing and general merchandise segment reported total revenue growth of 5.0% for the quarter.
       The Pep and Ackermans brands in aggregate reported sales growth of 6.4% and like-for-like sales growth of 3.2%. Sales performance was negatively impacted by a shift in "back-to-school" trade from December 2019 to January 2020 as a result of the later start to the school year. This is confirmed by double digit sales growth during the first three trading weeks of January 2020.
       Retail selling price inflation in core CFH product categories increased to 9.1%, driven by fluctuations in exchange rates. This compares to 1.6% in the comparative quarter and sales units reduced as a consequence.
       Notwithstanding the inflation, both Pep and Ackermans protected their positions as price leaders in the discount and value markets. Retail space of Pep and Ackermans expanded by 4.8% compared to the comparative quarter. New stores are performing in line with expectations and continue to meet feasibility thresholds.
       Pep Africa, which contributes c.3% to group revenue, continued to consolidate amidst adverse macro-economic conditions across most countries of operation. High levels of product inflation due to depreciating currencies in Angola, Nigeria and Zambia impacted consumer affordability. Constant currency sales declined by 2.8% and like-for-like sales reduced by 6.4%, translating to a decline in sales of 12.7% in rand terms.
       The Speciality division reported sales growth of 1.6% with like-for-like sales reducing by 0.6%. The clothing product categories performed well during the quarter. In the current economic environment consumers tend first to reduce spending on higher priced products such as footwear, resulting in a very challenging trading environment for the footwear brands. Tekkie Town continues to focus on improving stock-holding and other inefficiencies in the business which continues to impact performance.

Furniture, appliances & electronics
The JD Group reported revenue growth of 3.6% for the quarter. Retail sales increased by 2.2% while like-for-like sales declined by 0.7%. Credit sales declined to an overall credit mix of 17.5% compared to the prior year's corresponding 18.1%. Black Friday promotions were very successful reflecting the price sensitivity of over-stretched consumers.

Building materials
The Building Company reported a decline in sales and like-for-like sales of 4.1% and 2.9% respectively. Sales performance in the retail division improved during the quarter while performance in the wholesale and specialist divisions were negatively impacted by the challenging market conditions in the construction and building materials market.

Fintech
The Fintech segment reported revenue growth of 44.4%. This includes the contribution from Capfin following the internalisation of its credit book funding which is not included in the comparative quarter. The FLASH business increased revenue by 30.9% and continued to invest in new products, businesses, channels and geographies to complement its informal trader business, which consists of 170 000 traders. Capfin reported good results for the quarter. The loan book is healthy with credit performance meeting expectations.

Outlook
Trading in January 2020 has been relatively stronger in most brands, supported by the shift in "back-to-school". On a relative basis, Pepkor continues to perform well in context of the current retail market, underscoring the successful execution of its customer value proposition and focus on providing value to customers. The current macro-economic and employment landscape is not expected to improve in the near future. Pepkor however, remains positive and focused on the execution of its strategy to provide value to customers, market share expansion and enhancing efficiencies in the respective divisions.

Ihlobo in liquidation

Hammarsdale, KZN, SA – Footwear manufacturer Ihlobo Footwear cc has been in liquidation since October. The liquidator is Marcel Nel of Berrangé Inc. Further information, including the future of the court case between Ihlobo and Bata SA, will be published as we receive it.

SARS: Illicit trade 'is a threat to our people and sovereignty'

PRETORIA, Wednesday (January 22, 2020) – The South African Revenue Service (SARS) "is committed to work closely with other government agencies to stamp out the illicit trade in clothing and textiles, leather and footwear, precious metals and scrap metal, second hand vehicles, fuel and cigarettes because of its disastrous consequences for our economy and our people", SARS Commissioner Edward Kieswetter said in a release.
       “The losses in tax revenue and the negative impact on our domestic economy affects industries, erodes employment opportunities and generally denies the most vulnerable in society the social and economic well-being they deserve,” he said.
       The release said SARS "has found that importers or exporters in these sectors specifically are using various ways to avoid paying the import or export duties, as well as Value-Added Tax (VAT), that apply to the goods, which in turn impacts on the amount of revenue that SARS is able to collect for the growth and development of our country".
       "Another negative impact of illicit trade is the erosion of productive capacity in the country as goods are imported rather than produced locally. This in turn leads to job losses which aggravate already high levels of poverty and inequality.
       "That is why the Clothing and Textile industry, in particular, is a key focus area for SARS. Under-declaration of Customs value in this sector has increased from R5.2 billion in 2014 to R8.52 billion in 2018, with the under-declared Customs value in 2017 and 2018 representing 34% and 35% of the declared Customs value respectively. Some of the cases of non-compliance that Customs has come across recently in this area include declaring complete garments at values as low as 0.02 US cents, excess cargo (in one case, more than 80% of a container was not declared), fictitious importers’ addresses and misclassification of goods.
       "SARS forms part of an inter-agency working group with the DTI and Treasury, focusing amongst others on the Clothing Textile Leather and Footwear Industry. The working group is already seeing a number of successes since it was established last year. Within the first month of the project, Customs issued 20 letters of intent to seize goods from traders who were found to be non-compliant in terms of value, quantity, classification, licensing and registration. The potential loss to the fiscus of these intended seizures amount to about R20 million."

They Said It

"Well, we can certainly try. What they say is try to make your small area around you, be it your home, or your business, world class, even if everything else is crumbling around you." - Dr Clive Jackson-Moss, head of the International School of Tanning Technology, on coping with current economic conditions.

"Like a new hand of cards - another game." - Gale Rice, director of The Courteney Boot Company, on starting 2020.

The 2020 S&V Directory - Order now

The 2020 edition of the S&V Directory is in production and will be available in January. The online version is available immediately at R450 for 12 months' access.

2020 Trade Fairs Another essential service from S&V

Please note that we have updated most 2020 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: Hides & skins prices

Hides: The current average hide price is R1.42/skin. The current price is 2.9% higher than prices were a month ago and the current hide price is 64.1% lower than prices were a year ago. The local market remains under pressure. Global slaughter continues at a good rate, with global hide stocks also rising. Locally week on week prices were supported by the re-opening of the automotive plants and lower slaughter numbers. - Conce Moraba, agricultural economist, Absa group.

27/01/1969: Ashraf Saley, Nizam’s Enterprises, Azaadville.
27/01/1985: Mpumi Mazibuko, Leather Zulu, Randburg.
28/01/1944: Martina van Jaarsveld, Martina Shoe Boutique, Brandhof.
29/01/1973: Nelesh Gulab, Shawney’s Shoes/Walk Tall, Johannesburg.
29/01/1983: Zubairr Sadak, Shoe Talk, Durban.
30/01/1948: Pravin Mistry, Super Star Fashions, Vereeniging.
31/01/1961: Andy Williams, Agent, Cape Town.
31/01/1971: Ashley Benjamin, NULAW, Durban.
01/02/1934: Con Barnard, Stanhope Boot & Shoe, Pinetown.
01/02/19??: Elaine Smith, the DTI, Pretoria.
01/02/1969: Noeline Kemp, Knots, Bloemfontein.
02/02/1931: Gordon Singh, retired, formerly Monique Shoes, Pietermaritzburg.
02/02/1941: George Geyser, Dancewell, Durban.
02/02/1946: Chris Schroeder, retired, formerly PMC Group, Pinetown.
02/02/1965: Rod Oliveira, Rodrigo Shoes, Durban.

In Memoriam this week

27/01/2008: Jacob Anagnostakis (b. 03/04/1929), Watson Shoes, Great Brak River.
28/01/2004: David Aaron (b. 12/03/1939), Natal Shoe Components/Natalie Footwear [closed], Durban.
28/01/1997: Peter O'Brien, Buckman Laboratories, Hammarsdale.
29/01/1998: Peter Buglass, NPI, Durban.
31/01/2016: Rudi Geyser (b. 11/03/1937), EVA Industries, Durban.
02/02/2018: Sam Foster, retired, formerly Barker Footwear, Cape Town.

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:
Fred Footwear cc in Port Elizabeth, a footwear manufacturer, submitted its website and Facebook page for readers
LinkedIn page: https://za.linkedin.com/company/fred-footwear

Classified Adverts

FACTORY MANAGER

A position exists for a factory manager for a small footwear factory in Pietermaritzburg. The salary will be negotiable on a cost to company basis. The applicant must have a sound knowledge of footwear manufacture and be able to control a labour force of 120 operators.
Please forward CV to: application1945@gmail.com

Sales Rep seeks position

Robbie Thorne, with 30 years' sales experience in the footwear industry, seeks a sales position. Equally at home with components and finished footwear. Whatever your product, I will do it justice. Please call 072 633 2258.

Contact us

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

Next newsletter: February 3, 2020.

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