32 of 2021 – Newsbriefs.co.za

Newsletter No 32 / 27 August 2021

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Entries open for Twyg Sustainable Fashion Awards 2021

Is fashion fostering ethical practices? Do designers help with cultural and social sustainability? Do they challenge business-as-usual? Twyg is searching for designers who are concerned with these issues in order to spotlight their efforts during the annual Twyg Sustainable Fashion Awards 2021.

Twyg, a local not-for-profit organisation and online publication, launched its Sustainable Fashion Awards in 2019 to recognise and celebrate fashion designers who implement sustainable, circular, ethical and regenerative approaches to design.

“Designers are problem solvers, and right now, we urgently need problems solved. There has been a noticeable shift in how fashion thinks of itself with a realisation that its responsibility is far wider than making clothes,” Twyg said.

Against the backdrop of the pandemic and its effects on the economy, the organisation said, “Twyg is more committed to supporting the growth of sustainable and circular designers and helping them reach consumers than ever before. In 2021, supporting local fashion is critical to job creation.”

Nominations are now open and will close on 11 October 2021.
A new study calls out some of the world’s biggest fashion brands for their continued reliance on synthetic fibres made from fossil fuels, and for deceiving consumers with false green claims…

Awards categories

Awards categories for 2021 comprise the following:
• Student Award presented by Levi’s
• Accessory Award
• Innovative Design and Materials Award by Adidas
• Trans-seasonal Award presented by BMW i
• Nicholas Coutts Award
• Retail Award
• Influencer Award presented by Reebok
• CMT Award
• Textile Makers and Mills Award
• Changemaker Award presented by Country Road

Aside from the mentioned category sponsors, Country Road has come on board as headline sponsor, while long-standing partners Petco South Africa (the PET recycling company NPC), Fashion Revolution South Africa and SA Fashion Week will again support the awards.
At stake for winners

The overall winner of the Changemaker category will receive R100,000. The Changemaker Award will not be open for nominations. This category is supported by Country Road and will be awarded to the overall winner who will be drawn from the winners of all the categories and based on the judges scoring results. SA Fashion Week will also be giving the Changemaker Award winner a slot in a three-designer, shared show.

The design, textile, CMT and retail winners each receive an EcoStandard South Africa assessment of their brand.

The Influencer Award winner will receive a Reebok Package to the value of R40,000. This comprises of a R10,000 shopping voucher and the opportunity to partner with Reebok South Africa on sustainability-related campaigns in SS22, to the value of R30,000.

All winners and finalists will be listed in the soon-to-be-launched Twyg directory. “We have worked closely with EcoStandard South Africa to refine both the nomination and the judging process. A similar assessment process will be used to select brands for the Twyg directory,” the organisation said.

Using the framework of the United Nations Sustainability Goal 12, Twyg aims to support fashion that cares about people and the planet. Twyg founder and director Jackie May comments, “We are very honoured to be in a position to celebrate the excellent work that has been achieved despite, and sometimes because of, the current circumstances,” says Twyg founder and director Jackie May.

Click here for information on the categories, criteria and how to apply. F2F

Woolworths Launches “Tap and Go” Shopping in Store, a First for SA Retail

With customers increasingly doing their shopping from their mobile phones, Woolworths is once again set to transform its customer experience with the launch of its Near Field Communication (NFC) enabled stores. This latest addition, another first for South African retail, extends the retailer’s digital shopping capability by allowing customers to enjoy a seamless omni-channel shopping experience, in store and online. Using NFC, the same technology pioneered in the banking world through tappable cards, Woolworths’ customers will now be able to tap their phones on NFC tags in various locations in-store, to browse, try-on, and order products. NFC capabilities facilitate wireless communication between a user’s phone and a chip reader to augment and streamline the shopping experience for consumers.

The pilot launch will start in its Beauty offering to seamlessly bring to store the already popular Virtual Try-On feature launched on the Woolworths website. During Covid-19, customers have been unable to use tester products in store. Now, by simply tapping their phones to an NFC tag in store, customers can quickly test products digitally and either purchase in store or on their phones for delivery later. Additionally, for stores that don’t stock the full range of beauty products, by tapping on NFC tags customers can access the full range of products online, essentially creating a virtual ‘endless aisle’.

In a further move, customers will now also be able to rate and review Woolworths products on woolworths.co.za. The new Ratings & Reviews feature, as well as the recently launched Recommendations functionality, will enhance the customer shopping experience by introducing authentic peer-to-peer customer reviews, as well as AI driven product personalisation and product recommendations, to ensure customers find exactly what they need, wherever they need it. Ratings & Reviews are another way to listen to our customers to ensure we develop products that they love.
“Technological developments in the retail industry have unlocked many opportunities for us to grow in unexpected and exciting ways. We are delighted to be able respond to these changes and deliver a growing catalogue of innovative offerings; we launched our new concept standalone liquor store, our virtual WCellar experience and our beauty virtual try-on and virtual beauty consultations in June. The introduction of NFC tagging, Ratings & Reviews and AI driven Product Recommendations, will help us to build better connections with our customers and enable them to enjoy an enhanced and personalised shopping experience, whether in store or online. We want to make shopping with us easy, inspiring, and fast through our omni-channel initiatives.” said Liz Hillock, Woolworths Head of Online and Mobile.

NFC tagging is currently in pilot in beauty stores at the V&A Waterfront and Table Bay Mall and in WCellar stores in Nicolway and Sandton. Ratings & Reviews and Recommendations are available on the Woolworths website.

TFG’s Prestige clothing (Pty) Ltd leads the way as largest local apparel manufacturer in South Africa

Graham Choice

Leading fashion and lifestyle retailer, TFG’s strategic shift to swim against the tide by substantially investing in local manufacturing has already paid off. According to SACTWU’s Etienne Vlok the retailer is now the largest local apparel manufacturer in South Africa.

Five years ago, up to 80% of all TFG merchandise came from the East; today locally manufactured textiles have grown to a meaningful 37% and this will increase exponentially over the next few years.

“TFG’s investment in local manufacturing confirms localisation is a viable strategy to fight unemployment. The retailer’s import replacement will significantly increase TFG’s local production, resulting in more local jobs and upskilling. Unusually for South African retailers, TFG is creating thousands of jobs within its in-house manufacturing base” Said Vlok.

Over the past five years, TFG has worked with the South African government, the Department of Trade and Industry and Competition (DTIC) especially, to strategically create a diversified and agile local supply chain. This investment reduced its reliance on China and other international suppliers. This focused strategy has led to an increase in the contribution of locally manufactured products for their retail brands.

Evidence of this strategy can be seen in the retailer’s expansion of their Prestige Maitland and Caledon factories. Together with the launch of three additional hubs they are collectively projected to employ 5000 workers by 2026.

Five manufacturing hubs and growing

Prestige Clothing (Pty) according to the National Bargaining Council for the Clothing Industry employed 2470 permanent employees, as at 31 July 2021.

The factories in Maitland and Caledon launched with just 10 and six employees respectively. “These numbers are impressive for two factories. Prestige (Maitland) started in 1989 and now specialises in the manufacturing of ladies’ outerwear and Prestige (Caledon) started in 2008 and now focuses on the manufacturing of T-shirts and related products. By the end of this financial year, the Prestige Caledon factory will employ more than 700 workers and over 1000 employees in three years. This has had a major positive impact on Caledon and on its community.” said Graham Choice, MD TFG Merchandise Supply Chain.

On 1 April 2021, Prestige (Epping) was formed, which was previously made up of the ex- Seardel companies of Monviso, Bibette, Bonwit (then called TCI Apparel). It was acquired by Prestige clothing, to produce TFG’s formalwear apparel for both men’s and ladies. Additionally, the acquisition from Brimstone of the House of Monatic manufacturing unit and their assimilation into the Prestige Epping factory will arguably lead to the “rejuvenation by TFG of this highly skilled capability that would have otherwise been lost to the SA Clothing industry.

Prestige (Durban) launched on 1 May 2021 after TFG acquired TCI Mobeni. Together with TFG’s newly acquired assets from Playtex, this factory is intended to become the intimate wear and active sportswear manufacturing hub for the group.

In addition, Prestige clothing’s learnership programme will produce 288 graduates by the end of February 2022. Upon completion of this Learnership Programme these learners will be considered for permanent employment at TFG. This is likely to continue for a good few more years as these four hubs have the capability to grow to between 1100 – 1500 employees each, said Choice.

“The most unique hub is certainly the Prestige Johannesburg facility. We have been engaging with St Vincent School of the Deaf since 2019. The school had talented learners but on graduating or leaving school are unable to find jobs. TFG worked with the Fibre Processing and Manufacturing (FP&M) SETA to upskill and train the St Vincent School of the Deaf graduates. The contributions from Bidvest Industrial and (FP&M), under the leadership of CEO Felleng Yende, has undoubtedly played a significant role in the successful launch of this facility.

The workplace experiential training takes place at the Prestige (Johannesburg) facility, providing employment in this first of two intakes to 49 hearing impaired trainees. These employees are on a journey to receive a NQF2 learnership on completion.

All Prestige clothing manufacturing hubs have implemented the Quick Response Manufacturing methodology. This innovation uses best of class manufacturing technology to create shorter lead times and is a strategic advantage for the Group.

A recent success story was the production of 60% of The Fix brand merchandise made locally. The FIX “Changes*” range is another example of TFG’s Quick Response Manufacturing innovation. The 100% sustainable range is locally designed and manufactured by Prestige Caledon, where each garment is made up of 40% recycled polyester chips and 60% fabric waste.

Massmart – cautionary announcement

Shareholders are advised that the Company has entered into negotiations, which if successfully concluded, may result in the acquisition of a controlling stake in OneCart (Pty) Ltd. (“OneCart”). OneCart is a fast moving consumer goods market place and logistics platform that partners with leading retailers in South Africa to enable fast, flexible and efficient online sales and home delivery to consumers across the country. The platform provides access to products across the dry grocery, frozen and fresh foods, liquor, baby, health and beauty, household and pet supplies categories, all made available to consumers via a single shopping interface.

In keeping with the Company’s strategy to invest in and accelerate its eCommerce presence, this potential acquisition will allow the Company to further expand its capabilities in the fast growing on-demand delivery segment, while continuing to support the independent retailer marketplace model of OneCart. Massmart is currently in the process of negotiating and finalizing transaction documentation. Negotiations are at an advanced stage and Massmart is hopeful to conclude discussions in the coming weeks pending finalisation of a few key matters.

Accordingly, shareholders are advised to exercise caution when dealing in the Company’s securities until a further announcement is made.

Woolies – change to the board

The board advised that due to personal circumstances, Ms Zyda Rylands, the chief executive officer of Woolworths South Africa (WSA) and an executive director of WHL, has decided to pursue early retirement and consequently will be stepping down from these broader roles with effect from 30 September 2021.

The Group has reviewed its leadership structure for WSA and will not retain the WSA CEO role as it seeks to streamline its operating model.

At the request of the Board, Ms Rylands has agreed to defer her planned early retirement and remain with the Group through to 2024. For the remainder of her tenure, she will focus her energies and her passion on leading the WSA Foods business, which she has been instrumental in growing and positioning as an industry-leading, food retailer.

Mr Price – trading update

During the first 18 weeks from 4 April 2021 to 7 August 2021 (the “Period”) of the financial year ending 2 April 2022 (“FY2022”), the group recorded growth in retail sales and other income (“RSOI”) of 48.8% to R8.6bn. This performance was supported by the inclusion of the recently acquired Power Fashion (“PF”), effective 1 April 2021, and Yuppiechef (“YC”), effective 1 August 2021. Excluding these acquisitions, RSOI grew 38.6% to R8.0bn.

The financial performance commentary below is against the first 18 weeks of financial year 2021 (29 March 2020 to 3 April 2021, referred to as “FY2021 Period”) and to provide a more relevant comparison due to the significant effects of the COVID-19 lockdown restrictions enforced during FY2021 (all stores closed in April 2020), commentary is supplemented with comparison against the same period in financial year 2020 (31 March 2019 to 28 March 2020, referred to as “FY2020 Period”).

The group gained 250 basis points of market share and excluding acquisitions gained 90 basis points according to the Retailers’ Liaison Committee (RLC)from April 2021 to June 2021 (the latest period for which data is available). This is a continuation from the 150 basis points of market share gained in the twelve months to the end of March 2021. The group experienced several external disruptions during the Period which impeded performance. However, market share gains were achieved despite these challenges, highlighting the resilience of the group’s fashion- value business model.

The recovery in the consumer environment was negatively affected by extended COVID-19 lockdowns which moved from less restrictive level 2 and fluctuated between more restrictive adjusted levels 3 and 4 from 15 June 2021 to 26 July 2021. The country is currently under adjusted level 3 lockdown restrictions. Significant disruption was also caused to trade and supply chain operations by the civil unrest during the month of July in KwaZulu-Natal and parts of Gauteng, two of the country’s prominent provinces (Refer SENS 14 July 2021 and 21 July 2021). Additionally, the group’s primary port of entry, Durban, had its operations disrupted intermittently by the civil unrest and an unprecedented cyber-attack. All these factors have weighed heavily on business and consumer confidence, population mobility and hampered economic activity during the Period.

The commentary below relating to key group performance metrics excludes acquisitions.
South African retail sales grew 40.7% to R7.7bn over the FY2021 Period (+8.9% on FY2020 Period). The two-year growth of 8.9% includes the effects of the COVID-19 level 5 lockdown in April 2020, subdued discretionary sales in the retail sector in June 2021, high levels of pent-up demand in the base and the store closures due to civil unrest in July 2021.

Store sales were up 40.5% over the FY2021 Period (+7.3% on FY2020 Period), a strong performance considering that at one stage 539 stores were closed during the week of civil unrest and 104 stores remained closed and did not trade for the last 3 weeks of the Period, due to either being looted or partially damaged to varying degrees. Non-South African corporate-owned stores sales grew 33.2% to R546m over the FY2021 Period (+4.6% on FY2020 Period).

The group’s online channel continues to perform strongly, increasing sales 46.4% over the FY2021 Period (+103.2% on FY2020 Period), and contributing 2.9% to sales (1.6% in FY2020 Period).

Unit sales grew 34.4% over the FY2021 Period (-0.9% on FY2020 Period) and inflation was up 5.2% over the FY2021 Period (+10.1% on FY2020 Period).

The group’s diverse store footprint expanded by 211 stores from its financial year ending 3 April 2021(acquisitions: 181; new stores: 30) to total 1 629, offering accessible and convenient shopping locations for its customers. Trading space increased 5.2% (1.6% excluding acquisitions) over the FY2021 Period on a weighted average basis.

The prevailing consumer environment continues to see customers favouring cash transactions, and as a result the group increased cash sales 39.7% over the FY2021 Period (+11.5% on FY2020 Period), constituting 84.9% (82.7% in FY2020 Period) of total sales. The group has seen an improvement in credit sales, which grew 42.4% over the FY2021 Period (-5.3% on FY2020 Period), driven by an increase in new and existing account sales. Credit sales are approaching pre COVID-19 levels, despite a marginally lower account base due to consolidation during the FY2021 Period. The group continues to be prudent in its credit granting criteria due to the volatility of the consumer environment.

In the apparel segment, the group’s largest division, Mr Price Apparel has gained market share for 15 consecutive months, highlighting its strong customer value proposition. This has been achieved through its differentiated fashion merchandise and an intentional strategy to enhance the value offered to its customers. Miladys, which competes in a niche segment of the apparel market, has made good progress in countering the challenging consumer trends it has faced during the COVID-19 pandemic. It has successfully launched an online platform and traded into higher demand categories, resulting in market share gains in all 3 months during the Period. The recently acquired Power Fashion business, which competes in the lower-income segment of the market, also gained market share during the Period. Mr Price Sport performed strongly, albeit off a lower base than the rest of the group, but continues to face trading challenges due to the ongoing COVID-19 restrictions which have negatively affected schools, sports clubs and gyms.

Due to the extended COVID-19 lockdowns, the homeware trend has continued, and the home segment performed strongly. Mr Price Home and Sheet Street collectively gained 150 basis points of market share during the period. Cellular handsets and accessories increased sales 11.2% over the FY2021 Period (41.8% on FY2020 Period). Products are available in 371 stores and online, supporting further market share gains during the period according to Growth from Knowledge.

Other income grew 4.3% to R291m over the FY2021 Period (-10.5% on FY2020 Period). Debtors’ interest and fees were adversely affected by a reduced debtors’ book and lower repo rates.

Civil Unrest
The group previously communicated on 14 and 21 July 2021 that the civil unrest that took place in KwaZulu-Natal and in parts of Gauteng resulted in 111 stores closing. The group continues its assessment of the damage but is confident that it is adequately covered for its incurred losses through its riot wrap cover (business interruption covering lost gross profit from day 15 up to 12 months) and SASRIA insurance cover (physical damage to fixed assets and stock loss). The fully quantified insurance claims and GP margin impact are scheduled to be communicated at the interim results presentation in November. Shareholders are advised that accounting for the losses may take place in a different reporting period than when the insurance recovery is recorded. We are proud of our associates and partners for their efforts in ensuring that the affected stores become operational as soon as possible. Of the 111 stores, the group estimates that approximately 75% of these will be re-opened by the end of September 2021. An additional 10% of stores will re-open by the end of FY2022 with the outstanding balance of stores expected to re-open during FY2023.

Outlook
The group anticipates the consumer environment to remain constrained. The South African economy continues to feel the impact of the ongoing COVID-19 restrictions, exacerbated further by the slow pace of the vaccination roll-out. The recent civil unrest has added strain to the country’s GDP growth recovery. In this challenging environment consumers will become increasingly value conscious. The group is confident that its fashion-value merchandise offering is well positioned to build on the market share gains from the last year. Its recent acquisitions add further strength to its ability to increase its share of wallet in its two primary segments.

International port congestion and global supply chain imbalances are having a material impact on distribution operations and costs, and on the economy as a whole. In line with the rest of the sector, the group is experiencing the negative impact of these disruptions and anticipates it to continue into the second half of FY2022. The group’s inventory position at the end of the period was higher than planned due to the temporary store closures during the week of civil unrest. In addition, the total apparel and homeware market reported subdued sales growth in June 2021 (RLC decreased 3.8%), a similar trend experienced by the group, further compounding the stock position. The terminal winter component of this inventory is not significant, and management are focused on ensuring that the non-seasonal stock position improves throughout the remainder of FY2022. Consumers remain constrained and protecting them from inflation pressure is a priority in ensuring that the group’s everyday low-price promise
is delivered.

The group anticipates that it will report a reduced GP margin in H1 as a result of the following factors: inventory write-offs due to the civil unrest (recoveries from insurance claims will be accounted for under other sundry income); markdown levels have been acceptable but are higher than the historically low levels reported in the FY2021 Period; and the inclusion of acquisitions which trade at lower margins than the group. The non-recurring credits in the H1 expense base (rental relief and government support initiatives) will impact expense growth and management continues to apply its disciplined approach to cost control.

The group’s cash-based, omni-channel business model has proven extremely resilient over the last 35 years. Despite the store closures and fully funded acquisitions, the group’s cash balance remains healthy at R4.2bn. Our associates have consistently and proudly lived the group’s beliefs of passion, value and partnership through the events over the last 18 months. We extend our sincere gratitude to them for their commitment to the group and to all stakeholders for their understanding and support.

Did you know……..

Cotton & Wool

There is evidence that cotton and wool were used to create natural fabrics in about 3000 BC and evidence of silk use in 2500 BC in China.

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