S&V Weekly Newsletter Vol.8 No.48, November 28 2022

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We apologise for the lateness of this newsletter due to technical issues caused by the spontaneous combustion of municipal electrical meter box.

Black Friday: Mixed response

We asked 35 retailers - mostly privately owned chains and mini-chains - across SA, Namibia, Botswana, Lesotho, Eswatini and Zimbabwe - for a 1-sentence comment on Black Friday. Just 10 responded, 1 whose response is under They Said It, 1 to promise a response later today, 1 to say 'no comment', and another to say he didn't offer it.

"With general sentiment and trading conditions as tough as we have ever seen it, we were happy to see that our brands were well supported and that our campaigns yielded solid results. The proof of any sustainable uptick is however going to be in a good summer season and with a number of structural challenges nationally, most notably load shedding, it is best to be prudent at the moment." - Bernard Mostert, Mr Tekkie, George, W. Cape, SA

"I am over Black Friday, softens sales in the lead up to this weekend and has an impact on December sales. If we are going to keep it,  should be ONE DAY ONLY." - Kim Cunniffe, Kingsmead Shoes, Durban, KZN, SA

"Regarding Black Friday, it was OK but not like 2019.' - Sandeep Gandhi, Vision Sports, Gaborone, Botswana

"Queue Black Friday promotion runs from the Thursday to the Sunday, and we achieved an increase of 8% on last year. The sales pattern differed this year as the 25th fell on the Friday, whereas last year it was on the Thursday. Thursday dropped on last year, but Friday and Saturday were well up,  with Sunday showing the highest  growth." - Steve Miller, Queue Shoes, Cape Town, W. Cape, SA

"Black Friday was very good for Jumbo. I believe we were very well prepared. We have also opened 12 new stores this year and are achieving exciting success.” - Alan Scheckter, Jumbo Clothing, East London, E. Cape, SA

"Overall Durban Central was disappointing. Musgrave Centre, where we retail European garments, traded fairly well." - Sanjay Bhagwandas, Ginger Bhagwandas Exclusive, Durban, KZN, SA 

Extracts from Mr Price interim results 1 October 2022

Growth from more stores 'in a challenging environment'

Durban, KZN, SA (Thu 24 Nov 2022, 7:07) – Revenue for the interim period went up 6.5% to R13.2 billion (2021: R12.4 billion) and profit from operating activities grew 13% to R1.9 billion (2021: R1.7 billion). Profit attributable to equity holders of the parent rose by 13.4% to R1.3 billion (2021: R1.1 billion). In addition, headline earnings per share grew 10.6% to 496 cents per share (2021: 448.3 cents per share).

Company outlook Adverse global economic factors will continue to cast uncertainty upon the balance of this financial year. The impact of inflation in conjunction with rising interest rates makes it a very challenging trading environment. The retail credit environment is forecast to tighten as defaults rise, which should position the group positively as consumers seek merchandise that can fit their budgets. The group remains deliberate in its purpose of being the People’s Value Champion. Associates within the group understand customers’ current challenges and are committed to ensuring that they are surprised and delighted by the merchandise value offered by the group’s various divisions.
      Exchange rate hedges are below current spot rates for the remainder of FY2023 and newly contracted shipping rates reflect a noticeable decline from the heightened levels of FY2022. Previously communicated GP margin guidance remains intact. Including S88, capital expenditure for FY2023 is forecast to be approximately R1.3bn and the target of opening 230-250 new stores remains on track. New stores continue to deliver returns on invested capital well in excess of the weighted average cost of capital. Return on capital expenditure and return on invested capital over the last five years are market leading and the group will continue to allocate capital which generates long-term stakeholder value.
      Despite the disruption management remains focused on generating long-term sustainable returns from existing and new businesses, whilst stewarding its market leading metrics.
Group revenue was up 6.5% to R13.3bn, the group gross margin expanded 60bps and expense growth was well-controlled at an increase of 5.9%. This enabled the operating margin to improve by 80bps. This result was achieved in a highly contested retail environment where consumer spending was constrained.
      In the 13-week trading update issued in July 2022, shareholders were advised that revenue growth had been adversely impacted by several disruptive factors, some of which affected the industry as a whole, and continued for the duration of the Period:

- Electricity loadshedding – 56% of trading days were interrupted by loadshedding during the Period. The group estimates that over 80,000 trading hours were lost
- The inconsistent and non-payment of social grants during the Period
- The replacement of the group’s Merchandise Enterprise Resource Planning system on 2 April 2022, disrupted supply chain and merchant activities, and materially impacted retail sales in April and May. Sales for these two months combined, (which contribute approximately 40% of H1 retail sales), grew 3.1%, while June to August sales performance improved, growing 12.9%. September was a poor trading month for the market as a whole as severe load-shedding was implemented (44.1% of trading hours lost in H1 were in September alone) and sales declined 6.7%.

“The top-line performance did not meet our internal targets, but our market leading retail performance post COVID-19 with sales growth of 37.8% in the base, in which we gained further market share, was always going to present a challenge. I take comfort that the systems impact in particular is once-off and we have achieved a significant milestone in our Retail Modernisation Programme aimed at de-risking our IT environment and establishing an infrastructure to support our ambitions.” said CEO Mark Blair.

Results summary

Retail sales grew 6.0% to R12.6bn (comparable stores -0.3%). Group store sales (contribution: 97.0% of sales) were up 5.8% and online sales (contribution: 3.0% of sales) grew 11.2% (H1 FY2022: 49.9%). Retail selling price inflation was 3.8%, well below CPI with units increasing 1.7% to 122m units sold.
      By opening seventy-eight new stores and expanding eleven, weighted average new space grew 6.3%. After closing eight stores and reducing the size of nine, total weighted average space was up 5.7%, advancing the total number of corporate owned store locations by 4.1% to 1 791.

Cash sales constitute 84.9% of group retail sales and increased 5.2% during the Period. The group’s credit sales grew ahead of cash sales at 11.5% (contribution: 15.1% of retail sales), driven by new account sales growth up 20.0%. Growth within the existing credit customer base was robust and the One Store Card facility added sales of R242m during the Period. Applications for new accounts were up 45.5%, indicating increased pressure on household disposable income as household savings diminish due to inflation and interest rate increases. Transunion’s Consumer Credit Index (Q2 2022) reported that the credit environment is showing signs of sharp deterioration. The group has no appetite to push the credit channel outside of its long established low risk tolerance and reduced its approval rate by 640bps to 27.1%. The declined account applicants are increasingly converting to the group’s lay-bye offering, positively impacting the group’s cash sales.

The group’s gross profit margin increased to 40.3%, supported by a once-off inventory write-off in the Corresponding Period due to the civil unrest. Profit from operating activities increased by 13.0% to R1.9bn with the operating margin expanding to 14.7% of retail sales and other income (RSOI).

The Apparel segment (73.0% contribution to retail sales) increased RSOI 8.5% to R9.2bn (Comparable stores: 2.7% against a base of 31.2%). Operating profit increased 22.8% and the operating margin increased 190bps to 15.6%. According to the Retailers’ Liaison Committee (RLC), the group gained market share in every quarter over the last two years leading up to the retail ERP implementation. Over the last two quarters it has lost marginal market share. Power Fashion, which was not part of the systems change, gained market share in each month of the Period. The group has industry leading customer brand recognition, with Mr Price Apparel reported as the most shopped retailer in the last three months, being voted the ‘Coolest Clothing Store’ in the Sunday Times Next Generation Awards.

Studio 88 Acquisition concluded

As announced on the Stock Exchange News Service (SENS) on the 30 September 2022, all conditions precedent to bring effect to the group acquiring a 70% controlling stake in the Studio 88 Group (S88) were fulfilled. Management is pleased that S88 has exceeded budgeted expectations by delivering retail sales of R6.4bn and EBITDA of R793m for their unaudited Financial Year ending 30 September 2022. This resulted in an effective EV/EBITDA multiple of 6.3 at the closing date.
      Management and the Board welcomes its new partners and looks forward to continuing the growth trajectory of S88 in this exciting new merchandise and customer segment of the market. As the effective date of the transaction was 4 October 2022, the group’s H2 results will incorporate S88 for the full period.

Competition Commission approves Karan takeover of Triple A group

Pretoria, Gauteng, SA – Subject to a package of public interest conditions, the Competition Tribunal has approved the proposed merger whereby Karan Beef Feedlot and Karan Beef (Pty) Ltd intend to acquire the businesses of SK Caine Farming, Caine Farming (Pty) Ltd and Triple A Meat (Pty) Ltd.
      The conditions imposed on the transaction seek to support cattle farmers classified as historically disadvantaged persons (HDPs). The conditions also include supplier, enterprise and socio-economic development commitments.
      Karan Beef Feedlot is involved in crop farming, silage production and the backgrounding and feeding of cattle (feedlotting) to produce slaughter cattle. Karan Beef’s activities relate to the slaughter of cattle produced at the feedlot; deboning beef carcasses; packaging primal cuts; and the wholesale and retail of beef carcasses and deboned/primalised cuts of beef.
      The target firms are active in crop farming to produce feed for the cattle in their feedlot. They produce cattle for slaughter; slaughter all cattle produced in their feedlot at their abattoir; and supply beef carcasses and deboned/primalised beef cuts to wholesalers and retailers.

They Said It

"I don't think we'll be entering any 'Come Dancing' competitions, but she's recovering." - Sam Wells, Malome Leather Technologies, Boksburg, Gauteng, SA, on his wife, Chrissie, who was hospitalised for months in Italy with Covid, but who is now safely at home.

"The bottle of Sauvignon Blanc went down faster than all the Black Friday Specials Levingers had to offer!" - Yadhir Mooloo, Levinger's Dryclean & Shoe Clinic, Johannesburg, Gauteng, SA.

New subscribers last week

Chantel Maharaj, Caprini Footwear, Durban, KZN, SA.
Michael, Cooler Box Brothers, Boksburg, Gauteng, SA.
Moses Moyo, Botswana Meat Commission, Lobatse, Botswana.
Samir Achi, Five Thousand Miles, Johannesburg, Gauteng, SA.

Directory entries updated last week

C.L. Hansen Agencies cc, Durban, KZN, SA.
Caprini Footwear, Durban, KZN, SA.
Dajee Agencies, Johannesburg, Gauteng, SA.
Hansen Agencies (Pty) Ltd, Durban, KZN, SA.
Italtan, Johannesburg, Gauteng, SA.

Got anything you'd like to share?

Do you have any suggestions, comments or experiences about the industry that you'd like to share with the industry? - tony@svmag.co.za

28/11/1940: Raphael Capelouto, retired, formerly Brazilian Sandal Co., and others, Cape Town, W. Cape, SA.
28/11/1955: Tony Ford, left the industry, formerly Naturfit, Durban, KZN, SA.
28/11/1960: Baba Sourimuthu, Robach Components, Pinetown, KZN, SA.
29/11/1930: Mike Samuel, agent, Durban, KZN, SA.
29/11/1943: Nigel Ratcliffe, retired and emigrated, formerly Boehme Africa and TST Agencies.
29/11/1951: André Lubbe, retired, formerly AP Lubbe & Son, Stellenbosch, W. Cape, SA.
29/11/1965: Maria Mintoor, All Leather Shoe Manufacturers, Cape Town, W. Cape, SA.
30/11/1933: Ahmed Simjee, Hopewell, Durban, KZN, SA.
30/11/1963: Martin Paulsen,?, formerly NULAW, Durban, KZN, SA.
30/11/19??: Nicole de Vries, Logomotif, Cape Town, W. Cape, SA.
30/11/1971: Mantsebo Motsoanakaba-Phakoana, Fashion Parlour, Ladybrand, Free State, SA.
01/12/1946: Rob Cattell, Cattell’s Industrial Footwear, Springs, Gauteng, SA.
01/12/1948: Ken Gordon, retired, formerly Turbek Trading, Hermanus, W. Cape, SA.
01/12/1950: Aboobaker Gangat, May’s Factory Shop, Port Shepstone, KZN, SA.
01/12/1959: Arthur Lewis, AGB Sourcing & Consulting, Pinetown, KZN, SA.
01/12/1966: Grant N Munro, Freestyle Handmade Originals, Cape Town, W. Cape, SA.
02/12/1949: Stephen Chetty, retired, formerly NFLC, Vanderbijlpark, and Edcon, Johannesburg, Gauteng, SA.
02/12/1968: Teddy Moodley, Caprini Footwear, Durban, KZN, SA.
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, KZN, SA.
03/12/1976: Quintin Marais, Rolfes Chemicals, Boksburg, Gauteng, SA.

29/11/2001: Harold Sack (b. 14/09/1932), Nugshoe [closed], Pinetown, KZN, SA.
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, KZN, SA.
02/12/1996: Pieter Du Plooy, Bata Zimbabwe, Bata SA, KZN, SA.
02/12/2008: Tony Laycock (b. 26/01/1951), Mario Levi Manufacturing [closed], Uitenhage, E. Cape, SA.
03/12/2017: Jim Butterworth (b. 13/12/1937), Elliott Footwear [closed], Crown Footwear and Martin Johnson [closed], Durban, KZN, SA.
04/12/2007: Neville Beckley (b. 27/01/1915), SA Footwear [closed], Durban, KZN, 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)

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

5. Zimbabwean Dollar (ZWL$)

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

Note: For previous rates, see HERE

ABSA Agri Trends: Hides & skins prices

Johannesburg, Gauteng, SA (24 November 2022) - The current average hide price increased by 0.6% to R4.65/kg from R4.62/kg a week ago. The current price is 0.8% higher than the average price a month ago and 7.0% lower than the average price a year ago. The range of prices reported was as follows: Minimum price: R4.00 Maximum price: R5.00. Please note: Our methodology weighs the prices we collect according to the number of hides they sell in a month. This is done to make it more representative of the prevailing market price. 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.

Note: For previous prices, see HERE

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:
Italtan, Johannesburg, Gauteng, SA. Leather wholesaler.
ITL Group, Cape Town, W. Cape, SA. Trimmings and labels.

Classified Adverts

Agencies sought

Professional and very experienced agent, with extensive chain and retail customer list, seeks agencies for the Western Cape. - Skip Bradfield (0)82 477 7312, skipbradfield@gmail.com

Sewing Machine Mechanic/Technician seeks position

PREMCHAND HARIPERSAD. I have 34 years combined experience as a machinist/mechanic. Currently a qualified sewing machine mechanic. My qualification was obtained at ‘London City of Guilds institute’. During my tenure in the industry I have serviced and fixed high quality machinery that production depended on. Passion and skill for the industry assisted me in obtaining world class experience which I thoroughly enjoy not just as a job but more as my hobby. This allows me to exceed expectations of technical demands and standards ensuring maximum production at all times. Based in Durban CV available +27 78 151 7752 +27 67 047 3952 haripersadpremchand@gmail.com

Contact us

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

Next newsletter: December 5, 2022.

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

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