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S&V Weekly Newsletter Vol.6 No.48, Nov 30, 2020

This Newsletter is sponsored by SAFLIA

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Business

South Africa

Mr Price buys under-the-radar Power Fashion

Stock Exchange News Service
Durban, KZN, SA (November 26, 2020) – Mr Price announced that on 20 November 2020 it concluded an agreement to acquire high performing value retailer, Power Fashion, which currently has 170 stores across Southern Africa. Its differentiated business model gives the group access to a wider customer base and the opportunity to significantly scale further.
      Power Fashion was founded in the 1950s and is a high growth, family-owned apparel retailer based in Durban. It is value-focused and cash-based, servicing low to middle income households. It offers merchandise for the whole family, retailing largely apparel merchandise but also offering cellular products, basic household items, value cosmetics, electricity and other opportunistic products.
      Power Fashion merchandise is fashionable, but not fashion forward. It focuses on the deep value segment of the market and its price positioning is strongly aligned to its target customer base. Stores are typically high street and community centred malls rather than regional and super regional locations.
      The group’s strategic research has helped identify clear opportunities for growth, both organic and acquisitive. It has frequently communicated to shareholders its strict investment criteria for an acquisition, which has guided it as it has considered several opportunities in the last year. In Power Fashion, the group will acquire a business that meets each of these closely researched criteria:
- Value focused business that predominantly trades in cash and is aligned to the group’s core capabilities
- Fits within the group’s capital allocation strategy and is bolt-on in nature (the size of the transaction is approximately 4% of market capitalisation)
- High performing business with a strong track record, eliminating the need for any turnaround strategy and avoiding the associated management distraction and integration costs
- An existing business of attractive scale which is available at a reasonable valuation. Immediately earnings accretive and not dependant on synergies
- Opportunity for significant future growth in footprint and categories
- Low risk as opposed to acquiring an unknown territory with additional foreign exchange risk
- Strong management and skilled team to prevent distraction and ensure continuity
      The targeted effective date of the transaction will be April 2021 to align with the start of the group’s new financial year (FY22). However, this is subject to the fulfilment of both regulatory and commercial suspensive conditions, as are usual for such transactions. These conditions include competition authority approval in South Africa and Eswatini. The transaction will be settled in cash.
      The existing management team and all Power Fashion employees will transfer to Mr Price, and a new managing director will be appointed in due course. Noel Otto will retire on the effective date but will conclude a consulting agreement for a period post the effective date to provide continuity.

In the same week, Mr Price released the following results: Revenue for the interim period decreased by 14.4% to R9.204 billion (2019: R10.757 billion), profit from operating activities decreased by 32% to R1.148 billion (2019: R1.688 billion), profit attributable to equity holders of parent decreased to R753 million (2019: R1.148 billion), while headline earnings per share from continuing operations came to 335.4 cents per share (2019: 443.5 cents per share).
      The group continues to cautiously manage the ongoing challenges relating to COVID-19. The threat of the pandemic is by no means over and uncertainty regarding stricter lockdown levels remains. The group will continue to respond with agility to the trading environment while remaining vigilant of its associates' and customers' safety. The group's sales grew by double digits in the first six weeks of H2 FY21. However, sales growth was flat in the week prior to Black Friday week, indicating the extreme volatility in consumer purchasing behaviour. The group is expecting a challenging Black Friday week, due partly to COVID-19 store restrictions which will limit footfall in stores, as well as to the strong performance in the prior year. The group does however anticipate continued high online growth as customers switch channels. Management are cautious about the trading environment for the remainder of H2, due to high levels of uncertainty relating to volatile consumer spending patterns and a potential shift in shopping trends prior to Christmas. The South African government and private sector relief mechanisms are coming to an end, placing increased strain on household disposable income. Additionally, reduced private sector bonuses and a shift in school holidays (less days falling before Christmas than the prior year) could affect this key trading month. The resilience of the group's business model and its agile supply chain gives management comfort that it can balance the pursuit of additional market share while maintaining good fiscal discipline. The group continues to keep its associates and family members who have been affected by COVID-19 in its thoughts. It acknowledges the incredible commitment of all its associates and particular mention must be made of those on the frontline, for their efforts in managing trade in very difficult circumstances. It has been a trying time, however, the group is in a strong position to deliver growth and further shareholder return.

 

Shoe Zone: BF down, overall trade up, but...

Lenasia, Gauteng, SA – Black Friday trading was "definitely down" on last year, said Omar Sujee, member of Sujee Brothers cc, which trades as Shoe Zone, a 60-store family footwear and basic family clothing chain.
      "We've run it over 3 days," he said on Saturday, "Thursday, Friday and today. I don't have the full figures yet, but my feeling is that it's not as big."
      He said the slow- or non-payment of grants was "a big factor, especially in the income group we sell to".
      By contrast, he said trade since the end of the lockdown had been "not too bad - slightly better than last year, month-on-month".
      However, he was concerned about December and back-to-school trading.

 

 

LG Sports: Re-opening sport would help everyone

East London, E. Cape, SA – With the ongoing almost complete ban on team sports, business for a sports goods retailer is particularly difficult, said Clive Webb, proprietor of 1-store technical sports specialist LG Sports.
      "I think the ban is ridiculous," he said, "particularly at school level. Even if they get the virus, they're almost all unaffected by it. Normalising sport would also lift people's spirits, which is something we all need."
      He said LG hadn't taken part in Black Friday, "and looking around me, not many others have, either".
      LG has survived by selling apparel which can be worn for fashion, items for home gyms, and accessories for pool tables - "all small, but they add up", he said.
      LG is also looking into online sales.
      "We're pushing as much as we can," he said. "It's eating into capital, but we have to vasbyt - it's that or give up and lose everything."

 

Modway Shoes: Hopefully poor BF will lead to good December

Pietermaritzburg, KZN, SA – Black Friday had been very disappointing, and "if I could phase it out, I would", said Rakesh Morar, GM of 1 store family footwear retailer Modway Shoes.
      "I advertised it from Thursday to Monday, but you really expect it to be biggest on the day itself," he said on Saturday.
      "I think there are 3 possible reasons - consumers are cash strapped, some of the chains have been running it for so long that it's more like Black Month, and, perhaps most importantly, consumers have seen that aside from a few draw cards, it's not really worth their while to queue.
      "For us, as retailers, it's too much investment for 1 day."
      Retail since the end of the lockdown had been "quite good if you take into account what we've been through", he said.
      Looking at December, he said: "It can go 1 of 2 ways - either consumers now really are cash strapped, or they didn't waste their money on Black Friday and we will have a more normal, steady December."
      Modway is also now an online retailer. "I designed it myself during lockdown," he said, "and I know there's a lot to understand about it. You also have to promote it as much as you promote normal retail. I don't think my normal store LSM is ready for it, but I think it is the future, so we'll persevere."

 

SAFLIA re-elects chairman

Durban, KZN, SA – At a low key CEO's meeting last Wednesday, SAFLIA members "discussed where the industry is currently, and how they see the future unfolding", executive director Jirka Vymetal said. A brief AGM followed "so that the necessary protocols, as per the constitution, were followed, i.e. to receive and consider the annual report and the audited financials of the previous year, and to appoint Auditors and Directors if their terms are up for the ensuing year".
       The AGM also ratified the appointment of the PMC Group's Gregg Ripley-Evans to its Mancom to replace PMC's Andreas Horvath, who emigrated last year. Mancom elections are staggered, so that not all members are up for re-election in the same year. This year, chairman Noel Whitehead and member Jacky Hay were re-elected.
      Data from the SAFLIA Digest, which was released at the AGM, will appear in S&V Footwear & Leather Goods later this week.

 

 

Stock Exchange News Service (SENS)

Woolworths trading update

Extracts from trading update
Cape Town, W. Cape, SA – Woolworths Fashion, Beauty and Home continued to be affected by the constrained environment. The winter clearance sale was much smaller than that of the prior period and, together with a significant drop in demand for formalwear, negatively impacted sales growth for the period, which declined by 14.6%. Comparable store sales were also 14.6% lower on a 1.9% price movement, while net space reduced by 0.5%. The launch of summer ranges, together with the earlier commencement of our Black Friday promotions, has resulted in positive sales growth in the last three weeks of the period.

 

They Said It

"I thought if I ignored it long enough, it would go away." - Kaliber Footwear's Gary Brink, referring to an email from me asking for comment. No comment, but a They Said It. I guess that's one each.

"As an aside, could you swop the pic I sent you? My wife vetoed the first one." - Cape Produce Company's Greg Feinberg.

 

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

 

 

Exchange rates

1. SA Rand (ZAR)

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

 
  Euro € GBP £ US $ CNY ¥
2020/01/04 R15.97 R18.71 R14.31 R2.05
2020/01/11 R15.97 R18.76 R14.36 R2.07
2020/01/18 R16.04 R14.47 R14.47 R2.10
2020/01/25 R15.87 R18.82 R14.39 R2.07
2020/02/01 R16.54 R19.81 R15.00 R2.16
2020/02/08 R16.48 R19.41 R15.06 R2.15
2020/02/17 R16.16 R19.44 R14.90 R2.13
2020/02/22 R16.27 R19.43 R15.00 R2.13
2020/02/29 R17.27 R20.08 R15.66 R2.24
2020/03/07 R17.69 R20.44 R15.67 R2.26
2020/03/14 R18.04 R19.94 R16.25 R2.32
2020/03/21 R18.92 R20.50 R17.60 R2.48
2020/03/28 R19.63 R21.93 R17.61 R2.48
2020/04/04 R20.58 R23.37 R19.03 R2.68
2020/04/11 R19.70 R22.43 R18.01 R2.56
2020/04/18 R20.43 R23.49 R18.79 R2.65
2020/04/25 R20.59 R23.53 R19.02 R2.68
2020/04/30 R20.24 R23.27 R18.51 R2.62
2020/05/09 R19.89 R22.69 R18.29 R2.58
2020/05/16 R20.11 R22.49 R18.58 R2.61
2020/05/23 R19.24 R21.47 R17.64 R2.47
2020/05/30 R19.48 R21.67 R17.54 R2.45
2020/06/06 R18.93 R21.28 R16.77 R2.37
2020/06/13 R19.19 R21.39 R17.06 R2.40
2020/06/20 R19.37 R21.28 R17.25 R2.43
2020/06/27 R19.35 R21.28 R17.25 R2.43
2020/07/04 R19.14 R21.24 R17.01 R2.40
2020/07/11 R18.94 R21.16 R16.77 R2.39
2020/07/25 R19.39 R21.36 R16.64 R2.37
2020/08/01 R20.05 R22.28 R17.05 R2.44
2020/08/08 R20.78 R23.02 R17.63 R2.53
2020/08/15 R20.57 R23.73 R17.37 R2.49
2020/08/22 R20.23 R22.45 R17.15 R2.47
2020/08/29 R19.74 R22.14 R16.58 R2.41
2020/09/05 R19.66 R22.06 R16.61 R2.42
2020/09/12 R19.83 R21.42 R16.74 R2.45
2020/09/19 R19.32 R21.08 R16.32 R2.41
2020/09/26 R19.92 R21.81 R17.12 R2.50
2020/10/03 R19.39 R21.40 R16.55 R2.43
2020/10/10 R19.47 R21.48 R16.46 R2.45
2020/10/17 R19.40 R21.37 R16.55 R2.47
2020/10/26 R19.28 R21.22 R16.31 R2.43
2020/10/31 R18.91 R21.02 R16.23 R2.42
2020/11/07 R18.50 R20.50 R15.58 R2.35
2020/11/14 R18.34 R20.45 R15.50 R2.34
2020/11/21 R18.28 R20.47 R15.42 R2.35
2020/11/28 R18.25 R20.31 R15.26 R2.32

Note: For previous rates, see HERE

 


2. Botswana Pula (BWP)

Source: https://www.xe.com/currencyconverter/

 
  Euro € GBP £ US $ CNY ¥
2020/10/31 13.31 14.78 11.42 1.70
2020/11/07 13.34 14.79 11.24 1.70
2020/11/14 13.20 14.72 11.15 1.68
2020/11/21 13.15 14.72 11.09 1.69
2020/11/28 13.19 14.67 11.02 1.67


3. Malawian Kwacha (MWK)

Source: https://www.xe.com/currencyconverter/

 
  Euro € GBP £ US $ CNY ¥
2020/10/31 877.57 975.10 752.96 112.50
2020/11/07 901.04 998.19 758.96 114.86
2020/11/14 899.50 1003.02 760.06 115.07
2020/11/21 902.24 1009.85 902.24 115.97
2020/11/28 904.99 1006.91 756.45 115.06


4. Zambian Kwacha (ZMW)

Source: https://www.xe.com/currencyconverter/

 
  Euro € GBP £ US $ CNY ¥
2020/06/20 20.39 22.53 18.24 2.58
2020/06/27 20.48 22.52 18.25 2.57
2020/07/04 20.24 22.46 17.99 2.54
2020/07/11 20.54 22.94 18.17 2.59
2020/07/25 21.18 23.26 18.17 2.59
2020/08/01 21.55 23.95 18.31 2.66
2020/08/08 24.05 24.05 18.42 2.64
2020/08/15 22.08 24.40 18.64 2.68
2020/08/22 22.48 24.94 19.05 2.75
2020/08/29 23.33 26.16 19.60 2.85
2020/09/05 23.27 26.11 19.66 2.87
2020/09/12 23.66 25.56 19.97 2.92
2020/09/19 23.73 25.90 20.04 2.96
2020/09/26 23.26 25.48 20.00 2.93
2020/10/03 23.55 26.00 20.10 2.96
2020/10/10 23.85 26.31 20.16 3.01
2020/10/17 23.71 26.12 20.23 3.02
2020/10/26 23.96 26.38 20.28 3.02
2020/10/31 24.05 26.71 20.62 3.08
2020/11/07 24.40 27.03 20.55 3.10
2020/11/14 24.82 27.68 20.97 3.17
2020/11/21 24.92 27.90 21.02 3.20
2020/11/28 25.21 28.05 21.07 3.20



5. Zimbabwean Dollar (ZWL$)

Source: https://www.xe.com/currencyconverter/

 
  Euro € GBP £ US $ CNY ¥ Official US$ Rate
2020/06/20 405.54 446.91 361.90 51.17  
2020/06/27 405.98 446.46 361.90 51.13  
2020/07/04 407.08 451.78 361.90 51.21  
2020/07/11 408.89 456.71 361.90 51.70  
2020/07/25 421.71 463.13 361.90 51.58  
2020/08/01 426.09 473.50 361.90 51.58  
2020/08/08 426.53 472.42 361.90 51.93  
2020/08/15 428.56 473.55 361.90 52.06  
2020/08/22 426.90 473.72 361.90 52.30  
2020/08/29 430.86 483.20 361.90 52.71  
2020/09/05 428.42 480.70 361.90 52.89  
2020/09/12 428.70 463.13 361.90 52.95  
2020/09/19 428.45 467.52 361.90 53.46 80.48
2020/09/26 421.04 461.12 361.90 53.04 81.49
2020/10/03 423.96 468.06 361.90 53.29 81.44
2020/10/10 428.11 472.14 361.90 54.06 80.12
2020/10/17 424.13 467.25 361.90 54.04 81.34
2020/10/26 427.91 471.32 361.90 54.02 81.34
2020/10/31 431.64 468.64 361.90 54.07 81.35
2020/11/07 429.60 476.06 361.90 54.74 81.67
2020/11/14 428.29 477.58 361.90 54.79 81.67
2020/11/21 429.09 480.27 361.90 55.15 81.71
2020/11/28 432.96 481.72 361.90 55.04 81.81

 

 

 

 

ABSA Agri Trends: Hides & skins prices

Johannesburg, Gauteng, SA (November 16, 2020) - The current average hide price increased by 7.5% to R2.36/kg from R2.20/kg green a week ago. The current price is 28.9% higher than the average price a month ago and is 47.2% higher than the average price a year ago. Industry players are receiving prices between R2.00/kg and R3.00/kg depending on the quality of the hide. The global hide market has seen an improvement in hide prices due to an improvement in the upholstery sector as people perform home improvements and home décor with a big push for leather upholstery.  Current demand for hides is exceeding the supply which is adding support to prices. Expectations among industry members is that prices will continue to see an improvement in the coming months until reaching a more sustainable level where prices will then likely hold. 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.

Hide & skin price progression
Date Hides/Kg Dorper/Skin Merino Skin
2020/01/03 1.38 35.00 46.67
2020/01/10 1.42 28.69 45.71
2020/01/17 1.35 30.74 45.71
2020/01/24 1.39 33.75 48.14
2020/02/07 1.36 33.47 47.50
2020/02/14 1.36 33.75 47.50
2020/02/21 1.32 33.75 47.50
2020/02/28 1.29 37.22 43.89
2020/03/06 1.29 36.50 43.50
2020/03/13 1.31 36.00 43.50
2020/03/27 0.93 37.22 48.33
2020/04/03 0.92 37.78 47.36
2020/04/10 0.89 35.63 42.22
2020/04/17 0.88 39.38 41.25
2020/04/24 0.89 33.82 43.33
2020/05/01 0.82 34.55 46.88
2020/05/08 0.82 32.10 43.33
2020/05/18 0.77 32.10 43.33
2020/05/22 0.72 26.54 40.00
2020/05/29 0.72 25.44 40.00
2020/06/05 0.70 23.65 40.00
2020/06/12 0.72 31.14 45.71
2020/06/19 0.69 23.62 43.13
2020/06/26 0.73 28.92 47.14
2020/07/03 0.67 23.58 43.13
2020/07/10 0.68 24.96 43.13
2020/07/17 0.61 28.83 45.00
2020/07/24 0.51 25.63 43.13
2020/07/31 0.57 25.19 43.13
2020/08/07 0.61 26.77 42.50
2020/08/14 0.58 28.57 43.57
2020/08/21 0.57 25.63 43.57
2020/08/28 0.59 27.88 43.57
2020/09/04 0.61 27.17 43.57
2020/09/11 0.67 27.48 43.57
2020/09/18 0.82 27.40 43.57
2020/09/25 1.36 28.57 43.57
2020/10/02 1.50 28.65 48.33
2020/10/09 1.83 28.28 48.86
2020/10/16 2.06 26.88 43.57
2020/10/23 2.16 30.39 48.33
2020/10/30 2.20 26.95 43.57
2020/11/06 2.36 26.00 44.00
2020/11/13 2.38 23.59 40.00
Note: For previous prices, see HERE
 

  

30/11/1933: Ahmed Simjee, Hopewell, Durban.
30/11/1963: Martin Paulsen,?, formerly NULAW, Durban.
30/11/1971: Mantsebo Motsoanakaba-Phakoana, Fashion Parlour, Ladybrand.
01/12/1946: Rob Cattell, Cattell’s Industrial Footwear, Springs.
01/12/1948: Ken Gordon, retired, formerly Turbek Trading, Hermanus
01/12/1950: Aboobaker Gangat, May’s Factory Shop, Port Shepstone.
01/12/1959: Arthur Lewis, AGB Sourcing & Consulting, Pinetown.
01/12/1966: Grant N Munro, Freestyle Handmade Originals, Cape Town.
02/12/1949: Stephen Chetty, retired, formerly NFLC, Vanderbijlpark, and Edcon, Johannesburg.
02/12/1968: Teddy Moodley, Caprini Footwear, Durban.
02/12/1971: Happy Shongwe, Happy Boutique, Mbabane, Swaziland.
02/12/1974: Stuart Galbraith, Milspeed Marketing, China.
03/12/19??: Brandon Geyser, EVA Industries, Durban.
03/12/1976: Quintin Marais, Rolfes Chemicals, Boksburg.
05/12/1941: Kishor Makan, agent, Johannesburg.
05/12/1961: Eckhard Marshing, ACA Threads, Cape Town.
05/12/1962: Mahomed Amod Mahomed, Willowton Footwear, Pietermaritzburg.
05/12/1963: Dr Clive Jackson-Moss, ISTT, Grahamstown.
05/12/1970: Robert Chapman, Branded Footwear, Port Elizabeth.
06/12/1970: Ryan Hansen, left the industry, formerly with CL Hansen Agencies, Durban.

 

In Memoriam this week

30/11/2017: Dimitar Todorov (b. 08/11/1947), Afromerino Produce (now African Merino Trading) and Tannery Industries Botswana (closed).
01/12/1998: Gian-Carlo Rosa (‘John’) Donati, Nupro Shoes [closed], Pinetown.
02/12/1996: Pieter Du Plooy, Bata Zimbabwe, Bata SA.
02/12/2008: Tony Laycock (b. 26/01/1951), Mario Levi Manufacturing [closed], Uitenhage.
03/12/2017: Jim Butterworth (b. 13/12/1937), Elliott Footwear [closed], Crown Footwear and Martin Johnson [closed], Durban.
04/12/2007: Neville Beckley (b. 27/01/1915), SA Footwear [closed], Durban.

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