Retail news. Semester 1 of 2014 table of contents

Clothing retailers eye expansion. By: Zeenat Moorad 24 Feb 2012

Listed retailer Truworths (TRU) will open 19 stores in the second half of the 2012 financial period, it said on Thursday, 23 February. This comes at a time when consumer spending is expected to be stifled amid subdued economic growth and an increase in electricity and fuel prices. The group, which sells Truworths, Daniel Hechter, LTD and Ginger Mary clothing lines, announced that it would open 13 stores in SA and six in the rest of Africa. "Capital expenditure of R132 million has been committed for the remainder of the 2012 financial period," the retailer noted.

On Thursday, Truworths booked a 14% increase in first half profits, as it grew its customer base and increased market share. It said group retail sales increased 10.7% to R4.8 billion for the period, and comparable store retail sales grew 6.2%, while product inflation averaged 8%.

Based on figures from the retail liaison committee (RLC), Truworths' ladieswear clothing market share increased from 22.2% to 22.6% at December 2011 and its menswear market share grew from 21.7% to 22%.

Edcon, SA's biggest clothing retailer said it was also looking to accelerate its space growth. "Within SA we're targeting close to 5% in the next year and in the next couple of years per annum too. "We opened in Zambia recently and we're evaluating other countries in Africa," CFO Steve Binnie told I-Net Bridge/BusinessLIVE. On Thursday, the company said total retail sales advanced 12.3% for the quarter ended December 31 2011. Same stores sales rose 10.5%. "We're very pleased that we were able to gain some market share in the quarter," Binnie said.

Once known as the retail jewel of SA, Edcon was de-listed from the JSE in 2007 when its shareholders voted in favour of US group Bain Capital's R25 billion takeover bid - one of the biggest private equity deals to take place in SA.

Over the quarter, the company's Edgars Department Stores division, which includes Edgars, Boardmans and Red Square, increased retail sales by 13%, mainly due to strong growth from cellular products, childrenswear and footwear.

Edcon said the number of active accounts for the third quarter was 3.9 million compared with 3.8 million in the year before. Truworths' active account base grew 14% to approximately 2.4 million accounts, in the 26 weeks to end December.

With the opening of Spain's Zara, owned by Inditex, the world's biggest fashion retailer opening its doors in SA late last year, local players are smarting up and streamlining supply chain. Much like the arrival of US powerhouse Wal-Mart, Zara's arrival has been touted as a game changer for the local industry.

Last week upmarket rival Woolworths (WHL) said it would beef up its clothing business after a disappointing performance in the first half.

"If you look at clothing overall, we were slightly behind the market and that was driven by women's wear where we were also behind the market, and that's what we need to fix," CEO Ian Moir said, adding that some categories within clothing like kids wear, women's accessories and lingerie did trade well.

Woolworths clothing sales including Country Road's South African operations grew 11.2%, with sales in comparable stores up 5.9% in the 26 weeks to December period.

"We traded sort of where Truworths did, but not as well as The Foschini Group and we did a bit better than Edgars did," Moir said.

He pointed to a shortened merchandise cycle, as one remedy.

"We want to get more newness, more often - you can't, as a business, do six week drops anymore, back in the good old days that was fine, but not anymore, when you've got competition like Zara and The Foschini Group who are doing a good job on fashion.

"So every two weeks we now drop fashion, it started in late November and we've seen lifts in performance," Moir commented.

Likewise, Binnie said Edcon was focused on being more "responsive". "There are initiatives underway to shortening our cycle," he noted.

Mark Richard Bower will take over as Edcon's CFO from 1 July. Binnie succeeds Sappi's Mark Thompson as CFO on 9 July.

Burger King to open in South Africa. 8 Nov 2012

The world's second largest fast food hamburger chain, Burger King, has announced a joint venture (JV) agreement with Grand Parade Investments (GPI) to launch the franchise in South Africa. The opening of the first restaurant in the innovative new global design is planned for Cape Town in 2013.

The JV is subject to regulatory approval in South Africa and is expected to close before the end of the year. According to GPI, its exclusive rights and national rollout will enable the business to become a major presence and employer in South Africa. The aggressive growth plans are expected to contribute significantly to the South African economy and create a number of jobs for South Africans over the next five years and beyond.

Founded in 1954, the system operates in over 12 600 locations serving over 11 million guests daily in 83 countries and territories worldwide. Approximately 95% of its restaurants are owned and operated by independent franchisees, many of them family-owned operations that have been in business for decades. In 2012, the group successfully introduced similar joint ventures in Russia and China and in 2011, in Brazil - all focused on increasing market share in the fastest-growing economies worldwide.

"We are thrilled to announce the continued expansion of the brand with this JV," says José Cil, president, EMEA, BKW. "We have closely studied the region with GPI and believe that now is the time to develop the brand in South Africa. Today's announcement is an example of our company's strategy to accelerate international expansion by creating master franchise agreements with strong local partners in high-growth emerging markets."

"Hassen Adams and the management team at GPI have an excellent operational and sales record demonstrating strong growth and solid sales performance in its leisure portfolio over the last couple of years. We look forward to significantly expanding the scope of its portfolio with its first QSR (quick service restaurant) investment," he concludes.

"The company is perfectly positioned and poised to enter the QSR market with a significant number of restaurants planned over the next few years," said Hassen Adams, chairman of GPI. "Our experience and our successful track record in our outlet driven business will add substantial value to the newly acquired master franchise rights."

Mayor of Cape Town, Patricia de Lille added, "The City of Cape Town works hard to create a prosperous city that enjoys economic growth and development and job creation. Foreign direct investment that boosts our city and our country is warmly welcomed. We are honoured to welcome the global giant to Cape Town and South Africa. The City of Cape Town congratulates GPI on its JV and its efforts in bringing this high quality global brand to South Africa."

GPI was selected for a combination of key factors including its financial resources, industry-leading operational knowhow in the hospitality sector and expertise in running outlet driven businesses. Since its foundation in 1997, GPI has reported strong growth and solid revenue performance across its portfolio of investments.