42 of 2022

                           Newsletter No 42/4 November 2022                                 


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Sustainability in fashion – What to make of Zara’s foray into pre-loved clothes

Lester Kiewit speaks to Mike Mikkelborg of Sustainable Fashion Strategy about Spanish fashion chain Zara’s move into the preowned-clothing market which launches this week in the UK, in a bid to be more environmentally responsible.

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Puma’s classic new collection reimagines the golden age of football


Dutch football star Memphis Depay is the international face of the Puma Players’ Lounge collection.
Image: Supplied/Puma

SA Football legends Doctor Kumalo and Teko Modise as well as Dutch soccer star Mempis DePay feature in the players’ lounge collection, designed as a love letter to vintage football style.

While evoking a special era of charisma and taste, Puma’s new Players’ Lounge collection is a celebration of Puma’s history as a reputable brand in the sporting industry and the beautiful game of football.

The inclusive range, which was first revealed during Puma’s  Futrograde New York Fashion Week showcase in September, consists of apparel and footwear inspired by Puma’s heritage, and designed for the next generation.

The dress code for the Players’ Lounge collection has men’s wear staples such as polo shirts and knitted crew neck sweaters, elevated through carefully studied design.

The footwear in the collection depicts a range of styles that span from running to basketball and include refitting, with new details and touches, the Slipstream Lo, Suede VTG, RX 737 and the much-loved Blaze of Glory.

The distinct apparel has expressive details that include custom embroideries, trims and engineered knits. Puma’s iconic T7 tracksuit has been reimagined with an all-new pattern inspired by Puma’s historical formstrip.

Dutch football star Memphis Depay is the international face of the Puma Players’ Lounge collection.

As one of the most talented athletes playing the game, Depay is also known for his distinct off-the-pitch style — making him the perfect muse for the collection. Locally, SA football legends Doctor Khumalo and Teko Modise also feature in the classic collection.

The Puma Players’ Lounge collection is available now at Puma.com, Puma retail stores, Puma: Cape Town Select, Braamfontein, Gateway, Menlyn, Al Capone and Archive..


Are SA retail stocks just too expensive?

With the benefit of Stats SA retail sales growth data, Chris Gilmour digs into the South African retail sector.

I always greet the monthly release of retail sales growth data by Statistics South Africa (StatsSA) with a certain degree of trepidation these days, for a variety of reasons. First and foremost is the gut feel that retail sales growth really should be on a noticeable downwards trajectory, considering the poor state of the ambient economy coupled with the increasing interest rate environment.

But it’s not.

Admittedly, much of the rationale for this lies in favourable base effects from the previous year. Whether these relate to coronavirus restrictions or riots doesn’t make much difference. The second reason is the extent of revisions of data by StatsSA.

I can understand why a so-called “flash” estimate of retail sales might be reviewed and subsequently revised a month later. But I am discovering significant revisions taking place going back 3, 6, 9 and more months prior. This doesn’t instill confidence in the integrity of the data.

And then lastly, most JSE-listed retailers are now exhibiting good growth in sales and HEPS, virtually regardless of sector. Even companies such as Truworths which had been languishing for many years has, all of a sudden, produced record earnings. Having said that, most JSE-listed retailers’ share prices are still languishing well below the levels they were trading at five years ago, with the notable exceptions of Clicks and Lewis.

This used to be a glamour sector on the JSE, but not anymore. The companies are still very high profile and it is superficially easy to draw conclusions about their readiness to compete, based on subjective engagements on a personal level.

The big question now is for how long JSE-listed retailers remain on fairly elevated ratings, given the poor outlook for the consumer economy? The answer to this question is that only the strong and the adaptable will survive and flourish in the difficult years that lie ahead for consumer stocks.

Defensive choices

Let’s start with the defensive retailers: the food and drug retailers.

As previously mentioned, Clicks has been an outstanding performer in the market, even though its actual earnings performance has hardly ever shot the lights out. But it is in the right sector (pharmaceutical retailing and wholesaling) and that is highly resilient to the economic cycle. It’s perhaps not surprising that it remains the most highly rated retail stock on the JSE.

The second most highly rated stock is Dischem, not far behind Clicks. Although as a consumer I find it infinitely more interesting and varied than Clicks as a shopping experience, its fundamental earnings performance has been erratic and its share price isn’t vastly different to where it was five years ago following a clumsy, ham-fisted private placement instead of an IPO.

Food retailers in SA should, in the normal course of events, exhibit relatively low and predictable sales growth. That pattern has been thrown into confusion in recent times by the impact of lockdowns and liquor restrictions, as well as the impact of riots in KZN and parts of Gauteng.

The most recent example is the spike in sales in July, followed by a big reversal in August, as shown in the graph below:

Pick n Pay appears to have found a new lease of life under new CEO Pieter Boone. Its interim results two weeks ago were undoubtedly aided by comparison from a soft base in 2021 but nevertheless the group managed to squeeze out some decent sales growth for the first time in years. Their clothing division is really pumping, as is their discounter chain, Boxer.

But can Boone work his magic on the two other elements of the business – QualiSave and the traditional Pick n Pay chain? Only time will tell. The plan is to pit the traditional Pick n Pay chain up against Woolworths Foods at the top end, whereas QualiSave is aimed at the middle market.

Woolworths Foods has definitely lost market share to Checkers in the past year or so and now it’s going to be up against a re-energised Pick n Pay. Provided Pick n Pay can maintain even a slightly favourable price differential between itself and Woolies Foods, chances are it can take market share away.

This just leaves QualiSave. These are smaller Pick n Pay stores where the average number of products on the shelves (stock-keeping units or SKUs) is 8,000. This compares with 3,000 SKUs at a Boxer and 18,000 at a typical Pick n Pay. Just for the sake of completeness, a typical large Tesco in the UK would stock around 45,000 SKUs. QualiSaves should operate on a lower cost model than a traditional Pick n Pay and if that lower cost can be passed onto consumers via lower prices, the re-branding will work. But it will take time for consumer awareness in this regard to catch on.

Spar had its “day in the sun” a few years ago when it bought its Irish, south of England, Swiss and Polish operations. But Spar pricing is perceived to be somewhat more expensive than the average in SA and that could result in a loss in market share over time. Unlike Pick n Pay and Shoprite, Spar doesn’t really have a dedicated discounter brand in SA.

Meanwhile, Shoprite just keeps on pumping out the sales and earnings growth regardless. This is the benchmark by which all food retailers in SA are measured and that situation is unlikely to change anytime soon.

Five years ago I joked with SABC TV interviewer Arabile Gumede that I would rather buy Woolies 250g Chuckles Malted Puffs than Woolies shares. They were both trading at around R60 at the time. Today, the Woolies share price is still pretty much where it was then, perhaps a little higher, but Chuckles are now trading at R75. Go figure.

Clothing retailers

On the clothing front, The Foschini Group (TFG) and Mr Price remain the front-runners in the race to remain relevant in the languishing SA economy. TFG has particular relevance as it has differentiated itself with its quick manufacturing capability that is gradually onshoring an ever-greater proportion of its clothing requirements.

And Woolies? Well, if and when it can do something about disposing of the Australian millstone around its neck, it will have to take a long, careful look at its clothing offering. Still in many ways a glorified department store configuration, is it really best suited to the changing SA consumer economy?

According to StatsSA, the clothing, footwear, textiles and leisure (CTFL) category has been fairly strong for some time now, albeit erratic in nature, as show in the graph:

As is the case with food retailers, where the real battle is at the low end of the social spectrum between the discounters such as Boxer and Usave, so in CFTL the battle is on for the hearts and minds of the low-end consumer in South Africa.

Pick n Pay appears to have found a real niche in its clothing offering and it seems to be taking considerable market share. Mr Price is the acknowledged leader in this area with its fashion at a low price but TFG, as mentioned earlier, is attacking the situation from a different perspective, namely local manufacturing. All three should continue to do well in the SA environment.

It will be instructive to see what kind of sales and earnings growth Truworths manages to squeeze out of its local and UK operations this financial year. Most of its products are in entirely the wrong price points for a languishing economy and as yet it doesn’t have sufficient traction in the low-end segment of the market. Its credit-granting is arguably the best in the business but that is of cold comfort in a market that is increasingly credit-averse.

Is the entire sector too expensive?

So we’re left with a sector that was formerly glamorous in the sense that it contained companies with high sales and earnings growth and high ratings, but which are now just relatively highly rated without necessarily being high growth any more. The foreign fund managers loved the listed JSE retailers because they offered first-world retail management in an environment that looked like an emerging market. And they were primarily responsible for pushing the shares to the dizzy heights that they achieved some years ago. But the local institutions are far closer to the action and are not as easily impressed as their foreign counterparts. The reality is that SA’s GDP growth rate is unlikely to exceed 2% for the foreseeable future, which is a damning indictment on a country with the highest persistent rate of unemployment of any country in the world.

I have always taken the simple view that if a share is rated on a PE of 20x, it should offer HEPS growth of at least 20% per year for the foreseeable future. And yet we have numerous examples on the JSE of shares sitting on PE ratios of 20%+ but where HEPS growth is nowhere near 20% per year.

And while investors love Clicks because of the predictable nature of its business, does it really deserve to be rated on a PE of over 30 times?

So this is the time for highly focused stock-picking to come to the fore. Only highly innovative, nimble retail companies with strong balance sheets will survive intact over the next few years. Already, Edcon and Stuttafords – both unlisted – have hit the buffers and Massmart looks like it’s going the same way.

Shoprite, Mr Price and TFG have been investing heavily through the cycle and will emerge in good shape in my opinion. It looks like Pick n Pay is at long last following suit and also investing heavily.

Clicks will be around forever, though perhaps not on quite such a rarefied PE and the same goes for DisChem.

But beyond this list of six retailers, I can’t say with any certainty that they’ll all be around in ten years’ time.

SARS, the dtic start distributing clothing and footwear to KZN flood victims living in shelters

SARS, the dtic start distributing clothing and footwear to KZN flood victims living in shelters

Tshwane, 2 November 2022 – The initiative whereby the South African Revenue Service (SARS) and the Department of Trade, Industry and Competition (the dtic) have joined forces with Business and Labour to donate tons of seized clothing, blankets, and footwear to flood victims in Kwa-Zulu Natal, has entered its second phase. This entails the donation of clothing and footwear to the flood victims.

The initiative, dubbed Project Sizani (We all Help), took shape after the declaration of a state of disaster by Pres. Cyril Ramaphosa in response to the flooding in KZN during April  this year, which wreaked havoc in this province, killing over 400 people and destroying over 8 500 houses. Some parts of the Eastern Cape, North West and Free State provinces also experienced devastation due to the April flooding.

“Whilst the project is aimed at minimising the material impact of the affected people, it is also intended to restore dignity to those who were left almost naked by the disaster. Humanity is what drives this gesture more than anything else,” says Mr. Patrick Moeng, Executive: Focused Investigative Audit Unit: Syndicated Tax and Customs Crime Division at SARS, and leader of Project Sizani .

The initiative involves the distribution of some of the millions of tons of goods from the clothing, textile, footwear and leather industries (CTFL) that had been seized by SARS since 2018, which otherwise would have been destroyed in accordance with the Customs Act, Act 91 of 1964, administered by SARS, as well as a 2009 and 2020 NEDLAC agreement, stipulating that seized goods must be destroyed so as to avoid disruption to the South African market.

During the first phase, which started in June this year, the donation of blankets commenced in KZN, due to the urgent need after the April floods, where hundreds of flood survivors are still living in community halls (shelters).

The second phase comprises the donation of clothing and footwear to flood victims identified in the various district municipalities of the KZN, EC and NW provinces. It is a much more intricate process, due to the due diligence that has to be conducted for each item to be donated.

Team effort

A Governance Task Team (GTT) which comprises members from SARS, the dtic, Organised Labour and the CTFL industry is responsible for the execution of the project, although other role players that play an instrumental part in the execution of the project are the National Disaster Management Committee (NDMC), the Department of Social Development (DSD), and the Offices of the various Premiers in the impacted provinces. In addition, the involvement of Business and Labour , as key stakeholders, is necessary in every step of the project, to monitor the processes and ensure any risks that may harm the local business are mitigated.

To date, more than 28 000 blankets had been delivered to specific individuals at approximately 174 sites in Kwa-Zulu Natal.

The KZN phase 1 (blanket distribution) pilot paved the way for the roll-out of the second phase of the project: an even more intricate and tightly controlled process as the footwear and clothing items are wrapped in individual packages for specific individuals in specific shelters before they are handed over for distribution.

This second phase of the project is currently underway in KZN after a pilot at the two smaller shelters in Inanda and one in La Mercy offered a chance to develop and refine the process even further.

According to Mr. Moeng, 25 698 items of clothing have so far been donated to the first 31 of 74 sites in KZN. The packing, sorting and distribution to shelters continues to take place as more shipments of seized clothing arrive from Gauteng, courtesy of many shipping lines who extended their hand of goodwill to assist in transporting the containers of seized items to different parts of the country where the need has been identified.

The project is earmarked to be concluded at the end of November 2022 with North West and Easter Cape following on the footsteps of KZN.


Largest mobile clothing store

The largest mobile clothing store is 24.47 m² (263 ft² 56 in²) and was achieved by Misbar Al Azya by Al Telal Gents Fashion (UAE), in Dubai, UAE on 8 April 2021.

Misbar Al Azya is the latest project by Al Telal Gents Fashion created under the circumstances of the Global Pandemic. They have then decided to create an innovative project to take their services to customers’ doorsteps.

Telal Gents Fashion will be turning the largest buses in the market, into custom-made replicas of the showroom. From the customer experience point of view, Telal will be providing every service and product made available in the retail outlets at their respective locations.

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