S&V Weekly Newsletter Vol.6 No.38, Sept 21, 2020

This Newsletter is sponsored by SAFLIA

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MISS BLACK JERUSALEMA CHALLENGE VIDEO

Retail

Botswana

Getting stock into stores is vital

JB Sports, sport fashion, 32 stores in Botswana and 6 in Namibia.
Gaborone – Business was "a bit slow, but nothing out of the normal", merchandise manager Tinu Jacobs said. "We're still growing."
       He said there were problems with containers arriving late, "but we do the overtime to get the merchandise into the stores. If other people are complaining, perhaps they're being a bit lazy."
       He said JB wasn't currently offering specials or discounting because "the season has just started".

Eswatini

Waiting for border to open to travel

Happy Boutique, men's and women's outfitter, 1 store.
Mbabane – Proprietor Happy Shongwe said the ongoing closure of the border with South Africa to travellers had severely impacted her business. She normally travels to SA to personally select merchandise, but has been unable to do so since the end of March.
      "I'm waiting for the 1st of October," she said.

Namibia

Africa 'will bounce back'

Langerhans Pharmacy, comfort footwear specialist, 1 store.
Windhoek – Footwear sales nosedived during the lockdown, owner Kim Dreyer-Tré said, with customers only being interested in health supplements.
      "Now they're drifting back," she said, "and there's a glimmer of hope. We also had unseasonal rain a couple of weeks ago, which has lifted the general mood. We went out to lunch today, for the first time in 6 months, and the restaurant was packed with people wanting to live and to spend."
      However, she said the tourism sector, which is a major part of Namibia's economy, "has been decimated".
      "Lots of tourism-related businesses have closed, some of the former business owners have emigrated, many people who can have sent their money out of the country. The government hasn't been as supportive as it could have been, maybe because it couldn't afford to. But the country can't stay closed, and a resumption will start helping everyone."
        She said footwear supplies from all 3 of her major suppliers, Tsonga, Green Cross and Froggie, had been very badly delayed. "We only saw the Tsonga range last week - in September! - and Green Cross has only been able to deliver 2 styles up to now, not including a regular best-seller." She said she still had some summer stock from last year, "but the shelves don't look very exciting".
      "It's 28 degrees today. People want summer shoes."
      Langerhans also sells handbags and belts, but she said she had been very cautious about buying.
      "But we are determined," she said, "and Africa has to bounce back, though it will take a lot of time."

South Africa

Consumers still expect quality and brands

Less Price Fashions (Nigel), family outfitter, 1 store.
Nigel, Gauteng, SA – Trading has been "up and down", proprietor Naseem Tadia said. "Some days are quiet, others are just normal."
      He said unemployment was the major factor affecting his trading. Consumers were favouring casual over formal footwear, and still wanted reasonable quality and branded footwear.
      "It's difficult to say what the future holds," he said. "We just have to hope for the best."
      His father, Ebrahim Tadia, former owner of Less Price Fashions in Nigel and in Delmas, died of cancer in August. Naseem now owns the Nigel store, while his brother, Mahomed Tadia, owns the Delmas branch.

Lockdown 'the last straw'

Lavender Lane, antiques and gifts, including footwear, 1 store.
Heidelberg, W. Cape, SA – Lavender Lane has closed, owner Pat Soekoe said.
      "I closed in July," she wrote. "The lockdown had a huge financial effect. My husband passed away last year and at 67 I did not want to battle this out on my own. I'm hoping to sell my house and I will be going to live in Texas with my daughter."

Stock Exchange News Service (SENS)

Woolworths final results June 2020

More bad news for fashion

Extracts from SENS report
Cape Town, W. Cape, SA (September 17, 2020) – Revenue for the year decreased to R74.058 billion (2019: R75.179 billion), gross profit lowered to R25.349 billion (2019: R27.964 billion), operating profit lowered to R4.726 billion (2019: R5.121 billion), profit attributable to shareholders of the parent came to R557 million (2019: loss of R1.086 billion), while headline earnings per share lowered to 119.8 cents per share (2019: 342.9 cents per share).

Dividend: As previously advised the Board has not declared a final dividend for the 2020 financial year, with the interim dividend of 89.0 cps therefore being the total dividend for the year. Future dividends will be considered in the context of the conditions prevailing at the time.

Outlook: The trading environment in both Southern Africa and Australasia remains challenging and uncertain and is expected to remain so for the foreseeable future. The full economic impact of the pandemic is still unfolding and we expect consumer spending to remain constrained. Heightened competition and promotional activity is likely to persist, notwithstanding some consolidation in the industry. Post year-end, the Australian State of Victoria imposed an initial stage 4 lockdown in the metropolitan areas for a period of six weeks. This was extended for a possible further six weeks and has resulted in store closures during the period. The decline in trade in Victoria, CBD areas across the country and airport locations has, in part, been offset by the marked shift to online channels. The Group's intention is to ensure that we not only endure the impacts of the pandemic but that we can learn from it and emerge both strategically and tactically stronger as a result. To this end, the Board and management team remain resolutely focused on optimising the Group's financial position, liquidity and capital structure, and on repositioning the Group for sustainable longer term growth. Any reference to future financial performance included in this statement has not been reviewed or reported on by the Group's external auditors and does not constitute an earnings forecast.

Woolworths Fashion, Beauty and Home ('FBH'): Following a disappointing H1 FBH performance, H2 was severely impacted by the closure of stores and the restrictions on trade, including through our online channel for the duration of the lockdown period in South Africa and the other Southern African markets in which we operate. Since the reopening of storesin May, trade was focused on promotional and clearance activity to drive sales and reduce inventorylevels. Sales in H2 declined by 24.1%, ending the year 10.7% down on last year, while online sales grew by 41.3% in H2 and 35.4% for the year.
      Gross profit margin for the full year decreased by 3.5% to 44.0%. Expenses were well controlled and decreased by 2.8%. We made the decision to continue paying our staff during the lockdown period, which was in part supported through the government-funded UIF TERS subsidy. Operating profit decreased by 59.5% to R683 million, resulting in an operating margin of 5.5%.

Australasia
David Jones: While David Jones ('DJ') was able to continue trading most of their stores during H2, there was a significant decline in footfall, which was evidenced earlier in the half, as the impacts of the pandemic affected Asian tourism during the Lunar New Year trading period. Turnover and concession sales declined by 17.2% in H2, ending the year 6.4% below the prior year. The decline in store sales was partly mitigated by the shift to online, which grew by 100.7% in H2, contributing 18.4% to sales. The completion of the Elizabeth Street store redevelopment in April contributed positively to the uplift in sales in the latter part of the half, notwithstanding the effect of the pandemic on CBD locations.
      Gross profit margin was 2.7% lower than the prior year, due to the increased clearance activity in the last quarter to generate cash and reduce inventory levels. Costs reduced by 4.6%, as non-essential expenditure was curtailed to mitigate the impact of the loss of trade.

Country Road Group: Country Road Group ('CRG') stores were closed for eight weeks during the fourth quarter. A phased re-opening of stores commenced from 21 May 2020; however, the performance of CBD and airport stores remained subdued. The exit of the CRG brands from Myer, effectively in August 2019, also impacted comparable performance. As a result, sales in the second half declined by 25.6% and ended the year down 14.3% on the prior year. During the period, online sales remained strong, growing by 28.1% in H2, and contributing 33.5% of total sales.
      Gross profit margin declined by 3.1% to 58.6% due to heightened promotions to clear excess inventory. Expenses for the year, including costs incurred on the Myer exit, reduced by 11.3%. Operating profit decreased by 60.0% to A$40 million, resulting in an operating margin of 4.3%.

TFG: 22 week trading update

Online growth

Cape Town, W. Cape, SA (September 15, 2020) – This trading update should be read in conjunction with the trading updates published on SENS on 15 May 2020, 18 June 2020 and 13 July 2020. These updates provide further background with regard to store closures and store re-openings in the Group’s three main territories due to government-enforced lockdowns because of the global COVID-19 pandemic.

Group: Trading conditions across all three of the Group’s major territories, South Africa, the United Kingdom and Australia, continue to be challenging. With all three of these territories in economic recession following the effects of COVID-19, consumer spending has been under significant pressure, exacerbated by further job losses and social distancing rules. In South Africa, continued electricity load shedding has further impacted on the country’s economy (approximately 15 000 trading hours have been lost to load shedding during the months of May to August). In Australia, trade has been impacted by the re-introduction of lockdown measures in certain of the states. The UK stores started re-opening from mid-June, with a very slow ramp up as the social distancing rules and European restrictions remain largely in force.
      Against this backdrop, the Group’s retail turnover for the 22 weeks ended 29 August 2020 declined by 29.7% compared to the same period in the previous financial year. Customers continue to prefer online shopping with growth in e-commerce turnover for the Group of 29.7% for the 22 weeks compared to the same period in the previous financial year.

TFG Africa: TFG Africa’s retail turnover for the 22 weeks ended 29 August 2020 declined 26.4% compared to the same period in the previous financial year. While trade has improved in line with the easing of lockdown restrictions, it remains volatile. Homewares and cellphones, comprising nearly 23% of TFG Africa’s retail turnover, have however consistently showed turnover growth since the re-opening of stores on 1 May 2020. Online turnover, comprising 4.5% of TFG Africa’s turnover, continues to exceed management’s expectation with growth in excess of 100%, for the 22 weeks compared to the same period in the previous financial year.       Cash retail turnover for the 22 weeks ended 29 August 2020 declined 18.0% compared to the same period in the previous financial year. Merchandise deflation for the same period was 3.7%.

TFG Africa credit: TFG continues to deliberately maintain a significantly restricted credit appetite, with accept rates falling further down to below 15%. This policy is expected to remain in place while the macro economic conditions remain negative. As a result, credit retail turnover for the 22 weeks ended 29 August 2020 has contracted by 37,9% for the first 5 months compared to the same period in the previous financial year.       Following the reopening of our stores, cash collections continue to be ahead of management’s expectation; however they are still below pre-pandemic levels.

TFG London: TFG London’s pound sterling-denominated retail turnover for the 22 weeks ended 29 August 2020 declined 58.1% compared to the same period in the previous financial year. UK stores began to gradually re-open from June 15th following government guidelines. However, at the end of August, nearly all central London stores remained closed given the very significantly reduced footfall, which largely relies on tourists and office workers. It remains unclear as to when the majority of our UK consumers will return to working from their offices or attending social events, both of which have a direct bearing on the demand for our UK brands. Online turnover from TFG London’s own branded websites however increased by 11.9% for the 22-week period compared to the same period in the previous financial year.

TFG Australia: TFG Australia’s Australian dollar-denominated retail turnover for the 22 weeks ended 29 August 2020 declined 28.3% compared to the same period in the previous financial year. E-commerce turnover growth for the period was strong at 68.2% compared to the same 22 weeks in the previous financial year.
      All stores were closed on 27 March 2020 in response to COVID- 19 Government restrictions and regulations on social distancing. The re-opening of stores commenced end April, and all stores across Australia and New Zealand were reopened by the end of May.
      Trade in this business segment has continued to be impacted by individual states having different levels of restrictions based on the number of active COVID-19 cases.
      During August, Government restrictions resulted in store closures in both New Zealand and Victoria. New Zealand had 17 stores closed for 2 weeks, however these have subsequently re- opened. Victoria has had 84 stores closed from 2 August. These stores remain closed and the Victoria State Government anticipates lifting the lockdown regulations by the end of October.

Strategic initiatives in dealing with COVID-19: The impact of the COVID-19 pandemic remains dynamic and continues to evolve at different stages throughout the different jurisdictions within which we operate. We are adapting our business as effectively as possible to deal with the dynamic environment within which we operate and continue to make significant progress in respect of our cost saving initiatives through our previously announced Business Optimisation project. As previously announced, we have continued to access Government funding, where available to us, in each of our territories of operation.
      The successfully concluded rights offer will insulate the balance sheet during this time of global economic uncertainty and allow us to further execute on the company’s growth strategy and vision for the future.

Trading statement: As per paragraph 3.4(b)of the JSE Ltd. Listings Requirements, shareholders are advised that the Group’s interim financial results for the six months ending 30 September 2020 are likely to be at least 20% lower than those reported for the six months ended 30 September 2019, as follows:
Expected minimum difference 6 months ended 30 September 2020 - Cents
*Basic earnings per ordinary share: -106.7
*Basic headline earnings per ordinary share: -105.3
*Diluted earnings per ordinary share: -106.1
*Diluted headline earnings per ordinary share: -104.8
      Further guidance will be provided when management has a reasonable degree of certainty over the expected earnings numbers and prior to the release of the interim financial results ending 30 September 2020, which is expected to be on or about 5 November 2020.
      The forecast financial information on which this trading update and trading statement is based has not been reviewed and reported on by the company’s external auditors.

Competition Commission

Tribunal approves de-merger in agricultural product retail market

Pretoria, Gauteng, SA – The Tribunal has approved, with conditions, a transaction which is a de-merger in the agricultural product retail market, in which AFGRI Operations Limited (“AFGRI”) and Senwes Ltd (“Senwes”) intend to terminate a Joint Venture formed in 2013, named Hinterland Holdings (Pty) Ltd (“Hinterland JV”).
      AFGRI will re-acquire certain assets and businesses owned by the joint venture which it had formerly contributed, while Senwes will acquire AFGRI’s interest in the Hinterland JV. Post-merger, Senwes will have sole control of the Hinterland business.
      While the merger presents no competition issues, public interest concerns were raised in relation to employment. The Tribunal has approved the transaction on condition that no retrenchments take place for a period of two years.
      AFGRI Group operates through seven divisions which are involved in the growing of agricultural produce and the retail of agricultural products. Its product offering comprises input and mechanisation solutions to farmers, grain management through secure storage of agricultural products, financial services with a main focus on risk solution and insurance, collateral and stock monitoring and farming equipment, among other things.
      Senwes is one of the largest agricultural businesses in South Africa which provides grain handling and storage, financing, grain trading, grain transport, equipment sales, agricultural retail stores, insurance, agriculture inputs, and agriculture services to commercial farmers, processors (millers and oil seed processors) and traders.

They Said It

"Happens at least once a day with me. According to my wife." - CapeKaroo International's Frik Kriek, in response to me calling myself an idiot. My wife is a lot less polite.

Got anything you'd like to share?

Do you have any suggestions, comments or experiences about the lockdown that you'd like to share with the industry? We will publish the throughout the lockdown, so please let us know. - tony@svmag.co.za

ABSA Agri Trends: Hides & skins prices

Johannesburg, Gauteng, SA (September 14, 2020) - The current average hide price increased by 3.0% to R0.61/kg from R0.59/kg green a week ago. The current price is the same as the average price a month ago and is 60.4% lower than the average price a year ago. The local and global hide markets remain under significant pressure, with demand at very low levels, resulting in prices reaching almost zero for many players. Industry players are not very optimistic, given expectations that demand will remain low in the coming months. NB* Hide prices are determined by the average of the RMAA (Red Meat Abattoir Association) and independent companies. - Abrie Rautenbach, head Absa agribusiness, and Paige Bowen, agricultural economist, Absa group.

21/09/19??: Renate du Rand, Ghia 33 Shoes & Accessories, Knysna.
21/09/1972: Nicholas Gordon, Turbek Trading, Johannesburg.
22/09/1938: Peter Broughton, freelance, formerly Nicole Footwear [closed], Durban.
22/09/1972: Martin Dedekind, Hlungwana Trading Store, Paulpietersburg.
23/09/1945: Devan Nayager, Shoe Africa, Durban.
23/09/1951: Grant Fraser, Claw Boot, Johannesburg.
24/09/1944: Ron MacNiven, retired, formerly Decofurn, Durban.
24/09/1964: Hester Meijer, Berklee Fashion Clothing, East London.
24/09/1977: Ridwaan Moola, Foot Focus, Durban.
25/09/1965: Mahomed Dawood Kaka, Skoen Boetiek, Lichtenburg.
25/09/1973: Michael Cloete, Resource Fashion Trading, Cape Town.
25/09/1974: Yousuf M Jadwat, Fast Forward Clothing Co, Bellville.
25/09/1979: Zaid Paruk, City Express Stores, Durban.
26/09/1934: Siva Pillay, Allateens Bopsi Footwear, Durban.
26/09/1940: Cedric Novis, emigrated, formerly Bolton Footwear.
26/09/1944: Dick Smyth, designer, Durban.
26/09/1948: Melt van Niekerk, Checkmate, Secunda.
26/09/1970: Brett Pengelly, Trail Mix Trading, Durban.
27/09/1943: Rashid Mayet, agent, Johannesburg.
27/09/1933: Mussa Hajat, retired, formerly Footwear Centre, Blantyre, Malawi.
27/09/1973: Tracy Lopez, Lopez Leathers, Cape Town.
27/09/1988: Sylvester Chetty, Spunlok, Pinetown.

In Memoriam this week

21/09/1997: Ronnie Venter, agent.
22/09/2005: Simon Power (b. 10/07/1950), Mister Mover, Pinetown.
23/09/2005: Tony Mossop (b. 30/06/1942), Mossop-Western Leathers, Wellington.
24/09/2003: Werner Fehr, agent, Cape Town.
25/09/2019: Mike Gedye (b. 04/03/1950), Michelle Footwear, Durban.
26/09/1994: Cinnie Bonthuys, Crown Footwear, Pinetown.
27/09/2018: Mano Chetty (b. 29/11/1961), formerly PMC Group, Pinetown.

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:
Coast & Koi, Cape Town, W. Cape, SA. Handmade footwear.
Coastals, Durban, KZN, SA. Chain, agricultural co-op stores.

Contact us

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

Next newsletter: September 28, 2020.

SAFLIA enquiries: Tel 0800SAFLIA * Email info@saflia.co.za * Website http://www.saflia.co.za

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