S&V Weekly Newsletter Vol.7 No.30, July 26 2021

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The aftermath part 2

NCRF: Not as bad as feared, but there are hidden costs

Cape Town, W. Cape, SA – "On Friday, my biggest problem was how to get retail staff vaccinated," said National Clothing Retail Federation of SA (NCRF) executive director Michael Lawrence 2 weeks ago today, when the country woke up to a looted and burnt KZN and Gauteng. "Today, I don't know where they are."
      At that time, his members' (Cape Union Mart, Cotton On, LA Group, Mr Price Group, Pick 'n Pay Clothing, TFG, Truworths, Woolworths) greatest fear - aside from staff casualties - was that their "extremely vulnerable" distribution centres would be taken out. None were, although some non-member chains did lose distribution centres, none specifically apparel-related.
      Some independent apparel retailers weren't so lucky.
      What concerned them most about stock losses on that scale - aside from the cost - was replacing it. "There isn't the local capacity anymore to make those quantities," he said.
      That Durban harbour's container terminals could also have been targeted was also a concern, as was damage to the port itself, because around 70% of apparel imports for the Southern African Customs Union (SACU) area come through it.
      While those problems were avoided, others weren't.

Job losses: NCRF members lost several hundred outlets. One immediate consequence, as the survivors reopened, was that permanent staff from the destroyed shops had to be transferred to other stores. To make room for them, temporary staff lost their jobs, and temps from looted outlets also had to go.

Financial losses: "There's insurable risk, which is one element," he said, "but insurance won't cover all of your trading losses."
      He said the NCRF had not collated damage figures from its members. "Retailers were invited to send damage reports directly to the DTIC."

Higher costs: The looting will push up many other costs, some of them unexpected. As of that Monday, fires deliberately set in timber plantations had caused damage "approaching R600 million so far," he said, "and crews can’t get in to combat fires because of road blockages." One outcome will be higher costs of all paper and cardboard packaging.

JD: CBD 'looks normal, feels tense'

Durban, KZN, SA – JD Outfitters lost all 3 stores - 2 in the CBD, 1 in Umlazi Mall.
      "At the moment, we are devastated by the riots and we can't make decisions until we know that the buildings we are renting in, are safe and secured for us to consider reopening,” said member Jits Doolabh.
      He said the CBD "looks normal, but feels tense", and that he had not yet been able to get to the Umlazi store.
      "Even if I do consider reopening, I couldn't reopen all 3," he said. "I'd have to select where to start. There's also going to be a shortage of stock."
      He is also a partner in Angelino in Gateway, which wasn't attacked, "but it has been affected by the general downturn in business", he said.

Winners: Response by landlords key

Vryheid, KZN, SA – 5 of Winners Shoes' 9 KZN stores were looted, GM Ridwaan Haroun said. Its 3 Gauteng stores were untouched.
      "We're looking at what the landlords can do to assist us in reopening," he said. "We're also waiting to find out what insurance will pay out. We're at an assessment stage. Next week we'll have a clearer idea of where we're going."

Regent: Municipality looking at helping

Umzinto, KZN, SA – Regent Tailors & Outfitters' store was looted but not burnt, member Himal Gangaram said.
      "At this stage, I'm not too sure about restarting," he said. "The situation is still very volatile. However, I've just come from a business meeting where the municipality is looking at ways where they can intervene to assist stores to open again. For now, they're just compiling stats."
      He said he was waiting to hear from insurance before making a final decision. Regent has 3 staff.

Mr Pansula: Praise for heroic manager

Newcastle, KZN, SA – YM Seedat and Mr Pansula had 1 of its 4 stores - in Osizweni Township - looted, but member Yusuf Seedat said the business's hero was the manager of its Nqutu store, Nhlakanipho 'Nono' Sibiyya, who removed all the stock before the store was attacked.
      "He went above and beyond the call of duty," Seedat said. "Nqutu is about 60 kms from Nkandla, and a mob did try to loot the business."
      He said he would reopen the Osizweni store if the anchor tenant in the centre, Shoprite, reopened.
      He said all his suppliers had been in touch, and that all of them had offered help.

Trade

'Shoe production capacity in Iran is one billion pairs per year'

Teheran, Iran – The head of the union of machine shoe manufacturers said says Iran has the ability to produce a billion pairs of shoes a year, mostly for export to its neighbours.
      Iran is currently the 12th largest shoe manufacturer globally, making 177 million pairs.
      Quoted in Iranian trade magazine Leather & Shoe Industries News, Ali Ajdarkesh added: "Currently, there is a consumer market with a capacity of one billion pairs of shoes among neighbouring countries...Iran can meet the needs of these markets." According to him, the production of one billion pairs of shoes will create about one million jobs in the country. He said: "If we supply 700 million pairs of shoes that are domestically produced between $7 to $8, it will pave the way for a significant increase in the inflow of foreign currency into the country, which in itself needs government support."

Stock Exchange News Services (SENS)

Pepkor - voluntary trading update

For the full report, go here
Cape Town, W. Cape, SA (23 July, 2021) – Group revenue for the 9 months ended 30 June 2021 increased by 13.9% to R53.9 billion. This includes revenue growth of 8.1% reported for the 6 months ended 31 March 2021 and revenue growth of 27.9% for the 3 months ended 30 June 2021. Trading during the third quarter was volatile with moderate trading in April 2021, strong trading in May 2021 followed by subdued trading in June 2021.
      Performance during the third quarter compares to the corresponding third quarter ended 30 June 2020 which was affected by varying degrees of store closures due to COVID-19 lockdowns. The group was also not able to trade on its full product range in certain retail brands until June 2020. In addition, very strong trading was reported once stores reopened due to pent-up consumer demand.

Clothing and general merchandise: Segmental revenue for the nine-month period increased by 14.0% and by 28.7% for the third quarter.
      Pep and Ackermans continued to grow market share on a 12-month rolling period according to the latest Retailers’ Liaison Committee (RLC) data, albeit at a slower rate which was expected following the high base and significant market share gains achieved since May 2020. Retail space expanded by 3.2% year-on-year with 56 new store openings during the third quarter.
      Like-for-like sales growth for the third quarter based on the corresponding third quarter ended 30 June 2019 was 10.3%.
      Pep Africa performed well in constant currency terms as sales increased by 14.0% and like-for- like sales increased by 16.5% for the nine-month period. Sales in South African Rand (“ZAR”) terms declined by 9.9% for the nine-month period due to the weakening local currencies and the strength of the Rand.
      The Speciality business continued to benefit from strong consumer demand for casualwear and branded footwear in the value market segment.
      Like-for-like sales growth for the third quarter based on the corresponding third quarter ended 30 June 2019 was 12.2%.
      Collections on the Tenacity credit book, which facilitates credit sales in Ackermans and Speciality, were satisfactory and remained at similar levels to those before the onset of COVID-19.

Outlook: As reported by the group on 16 July 2021 on SENS, the civil unrest which erupted during July 2021 in the KwaZulu-Natal and Gauteng provinces of South Africa impacted Pepkor’s operations and the livelihoods of its people.
      After a thorough assessment, a total of 529 stores across the group were impacted in the affected areas. Stores were burnt, looted or damaged to varying degrees. This represents approximately 10% of the group’s total retail store base. In addition one of the JD Group’s distribution centres in Cato Ridge, KwaZulu-Natal was looted. Trading was disrupted, with a number of stores intermittently closed in the affected areas as a precautionary measure to ensure the safety of employees and customers. In addition, the group’s supply chain and distribution operations were severely disrupted in the affected areas as the group took swift action to deploy extensive tactical measures to protect and safeguard its infrastructure.
      Recovery plans have been formulated and implementation has commenced. The pace at which stores will be reopened is dependent on factors such as access to materials and equipment for store refitment purposes and the ability of property owners to restore premises which suffered extensive damage. All distribution operations have recommenced from Monday 19 July 2021 and plans were put in place to service JD Group stores in the affected areas through its other distribution centres. Merchandise teams are working with their long-standing and geographically diversified supplier bases to address any potential impact of stock shortages.
      As previously reported, the group has the necessary insurance cover in place to mitigate losses incurred for damage to assets, stock losses and business interruption. The process to quantify damages and initiate claims has started. Additional costs have been incurred to secure and safeguard assets and infrastructure. While these costs may not be fully recoverable, it is not expected to have a material impact from a group perspective.
      The group continues to expect a constrained retail environment going forward as a result of the longer term impact of COVID-19 on the South African economy, further exacerbated by the recent civil unrest. The group’s unparalleled position in the discount and value retail market segments continues to be increasingly relevant in addressing consumer needs.
      The leadership and operational teams of Pepkor have again shown incredible agility and resilience in dealing with this latest crisis. Pepkor will remain true to its purpose to make a positive difference in the lives of our customers and the communities in which we operate by providing convenient access to everyday products and services at affordable prices.

Mr Price - update regarding civil unrest

For the full report, go here
Durban, KZN, SA (21 July, 2021) – The group is pleased to advise that the damage caused by looting did not increase materially beyond what was first reported and totals 111 stores. At one stage over 500 of the group’s stores were temporarily closed but has now significantly reduced to 20 temporary store closures.
      Extensive efforts were made to ensure that the group’s distribution centres were unaffected and as of Tuesday 20 July, these sites were fully operational including all logistics and distribution activities. The Durban Port is experiencing some bottlenecks but this is expected to ease as all facilities are operating.
      A detailed assessment is being undertaken to inform insurance claims and to determine the re-opening of looted stores on a case by case basis. The group’s intention is to reopen all looted stores but will be considered based on the specific circumstances of each store location and the status of the individual shopping centres in which these stores are located. The impact on local suppliers is less than originally feared although some effect will be felt on forward merchandise orders. The full broader financial impact of the unrest will be quantified and communicated in due course.
      The group has received overwhelming support from all its partners and stakeholders and is extremely grateful for this. It is in the fortunate position to give back and through the Mr Price Foundation will be doing so immediately through several initiatives. The immediate need is for access to essential and grocery items and the group has identified specific communities connected to its distribution centres and supply chain which it will be providing with food parcels. In addition, it will be providing aid relief to communities at large both via its own channels and through recognised foundations. The group is encouraged by the proactive engagement between business and government and remains committed to being a part of the solution in South Africa.

Truworths - business update for the 52-week period

For the full report, go here
Cape Town, W. Cape, SA (20 July, 2021) – Truworths International Limited continued to be materially affected by the impact of the pandemic in its main markets in South Africa and the United Kingdom during its 52-week financial period ended 27 June 2021. While there were no hard lockdowns in South Africa during the current period, various levels of lockdown restrictions adversely impacted economic growth, employment, consumer confidence and spending, as well as retail foot traffic as the country experienced severe second and third waves of infection.
      In the UK, trading conditions were exceptionally challenging amidst the Brexit transition and the closure of the Group’s stores from 5 November 2020 to 2 December 2020, and then again from 5 January 2021 to 12 April 2021. Online trading activity, however, continued throughout these closures, and benefited from the UK-based Office segment’s strong e-commerce presence, as previously reported.
      The Group continued to mitigate the impact of COVID-19 on its operations through all available measures. Notwithstanding these measures, the pandemic has had a material impact on the Group’s performance. On the other hand, the performance of the Truworths Africa segment’s trade receivables portfolio has been better than anticipated at June 2020 and the reduction in the expected credit loss allowance has exceeded the anticipated increase in bad debts. Government support schemes, specifically in relation to business rates and job retention in the UK, have further mitigated the impact on the Group’s cash flows and profits.

Group: Retail sales of the Group for the current period increased by 0.5% to R17.0 billion relative to the R16.9 billion reported for the 52-week period ended 28 June 2020 (the ‘prior period’).
      Account sales comprised 52% (2020: 51%) of Group retail sales for the current period, with account sales increasing by 2.8% and cash sales decreasing by 1.9%, relative to the prior period.

Truworths Africa: Retail sales for the Truworths Africa segment (being the Group, excluding the UK-based Office segment and comprising mainly of the Truworths businesses in South Africa) increased by 5.5% to R13.0 billion relative to the prior period’s R12.3 billion, with account and cash sales increasing by 2.8% and 11.8%, respectively. Account sales comprised 68% of retail sales (2020: 70%). Truworths Africa’s like-for-like store retail sales increased by 4.3% and trading space decreased by 1.1% relative to the prior period-end. Product inflation averaged 1.4% for the current period (2020: 1.2% product deflation).
      Gross trade receivables (relating to the Truworths, Identity and YDE businesses) were at R5.4 billion (2020: R5.5 billion) and the number of active accounts was almost unchanged at 2.6 million relative to the prior period-end. Active account holders able to purchase and overdue balances as a percentage of gross trade receivables were at 82% (2020: 77%) and 15% (2020: 20%), respectively.

Office: Retail sales for the Group’s UK-based Office segment decreased in Sterling terms by 17.2% to GBP192.8 million relative to the prior period’s GBP232.8 million, as a consequence of the prolonged store closures. In Rand terms, retail sales for Office decreased by 12.9% to R4.0 billion. Office continues to benefit from its strong online presence, with online sales growing by 18.2% relative to the prior period and contributing approximately 63% (2020: 44%) of retail sales for the current period. Trading space for the Office segment decreased by 22.0% relative to the prior period as the Group continued its strategy of exiting marginal and loss-making stores.

Civil unrest, looting and disruption in South Africa: 57 of the Group’s South African store portfolio of 758 stores have been impacted directly and severely by looting and destruction of property. More than 55% of the 57 stores are located in central business districts and small shopping malls and approximately 45% are located in regional centres. These stores would normally account for approximately 7% of the retail sales in the Group’s South African store portfolio. No super- regional malls have been impacted. Furthermore, approximately 160 stores have been impacted indirectly as a consequence of precautionary closures. At present it is too early to determine the full extent of damages suffered and when the stores that have been closed pre-emptively will resume trading.
      To date, the Group’s own distribution centres, which are located in the Western Cape, have not been affected. Additional security measures have been put in place to mitigate the risk of loss and to ensure the safety of personnel.
      The Group also has manufacturers in KZN that have been looted or have had garments, raw materials and equipment vandalised, in some cases rendering these manufacturers inoperable until further notice. Some factories that have not been vandalised or looted have been impacted by the unrest, as employees are either fearful or unable to return to work in affected areas. However management has been advised that most of these suppliers have either returned, or are expecting during this week and next to return to operational mode.
      The bulk of the Truworths Africa segment’s locally produced merchandise is supplied by manufacturers based in the Western Cape, while imported merchandise generally arrives via the Cape Town harbour. These factors have significantly limited the direct impact of the incidents on merchandise sourcing and procurement.

They Said It

"As for sheep and goat skin, not a lot. However...  I can contribute their meat is really tasty on the braai." - Quintin Marais, Rolfes Leathers, Boksburg, Gauteng, SA, when asked for comment about sheep- and goatskin leathers for the feature in the upcoming S&V African Leather.

"When we bought the shop 17 years ago it already had this mix, and fortunately for us, because to depend on one stream of income i.e. sport, in this climate, would really be difficult. We have even branched out into beer kits and silver jewellery. You have to look for every gap." - Sharon de Wilzen, The Watch Battery & Sports Replay, East London, E. Cape, SA, explaining its unusual product mix of sports goods and watch repairs. When I said the KGB governing our lockdown must have forgotten about beer kits, she added: "Well if they ban beer kits, they must also ban sugar and yeast....." Quite. And pineapples too, from what I hear. Idiots.

Directory and Calendar updates

The S&V Directory and the S&V Calendar are dynamic documents, undergoing ongoing constant updating. Readers are therefore advised to refer to them at least once a week.

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

26/07/1958: Mahomed Shaikh, River Queen, Durban, KZN, SA.
26/07/1977: Craig Kisten Pillay, Topline Manufacturers, Durban, KZN, SA.
26/07/1982: Jameel Cassim, Fashion & Shoe Scene, Gauteng, SA.
27/07/1949: Oli Gardella, retired, formerly Gardella Shoes, Pinetown, KZN, SA.
27/07/1959: Vibeke Dugmore, KKI Leather Marketing, Oudtshoorn, W. Cape, SA.
27/07/1958: Morris Marimuthoo, Allimor Footwear, Durban, KZN, SA.
28/07/1970: David Platt, formerly Simitri Specialty Chemicals [closed], Kempton Park, Gauteng, SA.
28/07/1950: Charles Stuart White, retired, formerly commission agent, Durban, KZN, SA.
29/07/1962: Graydon Cock, emigrated, formerly Eddels, Bata SA and Puma SA.
29/07/1965: Ashley Pillay, National Bargaining Council, Durban, KZN, SA.
29/07/1972: Shona Kelland, Chillisource, Durban, KZN, SA.
30/07/1959: Alan Munsamy, Nulaw, Durban, KZN, SA.
30/07/1949: Gerald Batt, last with Uber Gruvi (closed), Cape Town, W. Cape, SA.
30/07/1973: Frankie Sequeira, Novel’s Outfitters & Shoe Store, De Aar, N. Cape, SA.
31/07/1940: David Berry, retired, formerly Rockshoes [closed], Pinetown, KZN, SA.
31/07/1969: Mark Dicks, emigrated, formerly Prime Leathers, Pinetown, KZN, SA.
01/08/1935: Bev Jack, retired, formerly Bata Zimbabwe and LAIFEZ, Harare, Zimbabwe.

In Memoriam this week

26/07/2019: Cassim Shaikh (b. 30/09/1942), Hopewell Footwear, Durban, KZN, SA.
29/07/1993: JA "Pat" O'Brien, agent, Cape Town, W. Cape, SA.
29/07/2003: Dennis South, (b. 26/12/1923), Cuthberts [closed], Johannesburg, Gauteng, SA.
29/07/2010: Eric Harvey (b. 09/02/1925), Barker Footwear [now Bolton Footwear], Cape Town, W. Cape, SA.

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.

3. Malawian Kwacha (MWK)

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

4. Zambian Kwacha (ZMW)

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5. Zimbabwean Dollar (ZWL$)

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

ABSA Agri Trends: Hides & skins prices

Johannesburg, Gauteng, SA (July 23, 2021) - The current average hide price increased by 3.3% to R8.44/kg from R8.17/kg a week ago. The current price is 1.6% higher than the average price a month ago and is 1284% higher than the average price a year ago. Selected market stakeholders note that demand over the short to medium term can weaken as a result of recent unrests. NB* Hide prices are determined by the average of the RMAA (Red Meat Abattoir Association) and independent companies. - Marlene Louw, senior agricultural economist, and Nkhensani Mashimbyi, agricultural economist, Absa group.

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:
Fashion King, Port Elizabeth, E. Cape, SA. Men's and women's comfort footwear specialist.
Fashion Passion, Windhoek, Namibia. Women's boutique.

Contact us

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

Next newsletter: August 2, 2021.

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

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