Newsletter No 09 / 11 March 2022
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TFG to buy Coricraft and Volpes owner in R2.35bn deal
Fashion and lifestyle retail group TFG has entered into an agreement with Tapestry Home Brands (Tapestry), a prominent home furnishings group, to acquire the entire share capital of Tapestry for a cash purchase consideration of R2.35bn, representing around 5% of TFG’s market cap.
The proudly South African Tapestry group is a direct-to-consumer, vertically integrated designer, manufacturer and omnichannel cash retailer servicing customers’ sleeping and living needs. The group includes popular made-to-order furniture retailer Coricraft, branded bedding retailer Dial-a-Bed, value bedding retailer The Bed Store and home textile retailer Volpes.
According to TFG, which owns retail brands including Markham, Foschini and @home, the acquisition will augment TFG’s current @home business which offers premium home textiles, kitchenware, décor and furniture in the middle to upper segments as well as Jet Home which offers value fashionable homeware.
Following the acquisition, TFG Home Division will have nine Home consumer brands (@home, @homelivingspace, JetHome, Coricraft, Volpes, Dial-a-Bed, The Bed Store, Granny Goose, and Biggie Best), and four vertically integrated factories (mattresses, upholstered furniture, household textiles, duvets and pillows). TFG will also have an expanded distribution network and its own last-mile furniture delivery and assembly service.
With this acquisition, TFG will add the almost 2,500 Tapestry employees to its own complement of more than 27,500 employees in South Africa, and a further three manufacturing facilities to the growing TFG local production footprint.
Fast-growing home furnishings sector
Tapestry was established in 2005 and has grown from 12 to 172 stores across South Africa, Namibia and Botswana, with significant runway for further expansion.
TFG stated that Tapestry Brands’ unique business model, with easily scalable local manufacturing and distribution capabilities, is an excellent strategic fit within TFG’s Home division, which has become increasingly vertically integrated following the recent acquisition of Cotton Traders manufacturing and Granny Goose premium bedding.
“This is an exciting opportunity of scale to acquire a prominent player in the fast-growing consumer home furnishings sector while unlocking manufacturing and distribution synergies with adjacent brands in the TFG stable,” said TFG CEO Anthony Thunström.
“The Tapestry brands are well positioned for accelerated growth in omnichannel retailing and will particularly benefit from TFGs leading capability in this area. Furthermore, those brands have solid plans in place to take full advantage of the strong tailwinds and favourable consumer trends in the home furnishings sector.
“Lead indicators for this sector include listings of homes for sale, with around 400,000 currently up for sale on top online portals, and actual sales of around 50,000 a month. This creates multiple homeware and furnishings opportunities – in the kitchen, bedrooms, living rooms, and outdoor spaces,” said Thunström.
Thunström added, “Beyond their own robust growth plans and the potential to roll out more store footprint, one particular example being the Volpes business, we see further opportunities to grow these businesses by integrating them into our TFG e-commerce ecosystem, with our 26 million-strong customer base, and adding credit facilities to their offering, while augmenting the local manufacturing capability of the TFG group.”
Investment in homeware and local manufacturing capability
Thunström said TFG remained confident and committed to investing in South Africa despite the July unrest and rioting of last year.
Shani Naidoo, TFG group director for the Homeware Division, added “We are delighted to have reached agreement on the acquisition and look forward to bringing our consumers more choice and customisation across the TFG stable, as we bring our scale to bear in growing the Tapestry businesses.
“This R2.35bn investment in our homeware and local manufacturing capability is strongly aligned to the government’s furniture masterplan. We will continue to work to support Minister Patel’s plan to grow employment, develop skills and reindustrialise the sector. Our intention is to grow the Tapestry brands aggressively and thereby create new jobs in the business.
“The Tapestry group and its management team have implemented a unique, highly cash generative business model with excellent historic returns. The highly regarded management team, headed up by former Nando’s South Africa managing director Kevin Utian, will continue in their roles to ensure continuity. The ability to increase capacity and improve profitability with limited further capital expenditure was an attractive proposition for TFG,” said Naidoo.
Martin Sacks, executive chairman of Westbrooke Group, which is the lead shareholder of Tapestry Home Brands, said the company had an excellent management team and could not have wished for a better home than TFG. He said that the Tapestry brands’ reputation for delivering quality, personalisation, style and value, and nationwide last-mile distribution capabilities, have secured steady growth both in-store and online, alongside strong historic profitability.
Implementation of the agreement is subject to the fulfilment of standard conditions for a transaction of this nature, including approval by the relevant Competition Authorities. Bizcommunity
Turkish textile industries feel heat of Ukraine invasion
By Ceyda Caglayan
A carpet shop in Istanbul. Picture: Linus Mimietzunsplash
Istanbul — Textile and leather goods-makers in Istanbul’s garment district are feeling the impact of Russia’s invasion of Ukraine as customers in Moscow and Kyiv have cancelled $200m in orders in the past week, industry officials say.
The loss of trade adds to strains on Turkey’s economy, with officials estimating that more than $1bn is directly at risk to the textile industry alone if the conflict in Ukraine continues.
Mustafa Senocak, head of the Istanbul Leather and Leather Products Exporters Association, said orders for “hundreds of thousands of pairs of shoes and thousands of leather jackets” have been cancelled.
Some Russians say they can pay with the former rouble exchange rate, otherwise they can’t make payments, he said.
Russia and Ukraine accounted for more than $1bn in Turkish exports of leather shoes, jackets and finished and unfinished clothing in 2021, and nearly three times that much in the unofficial “suitcase trade” centred in Istanbul, officials say.
The hit to trade puts further pressure on Turkey’s economy after a currency crisis in December and resulting inflationary spiral. Falling export income adds to the Turkish current account deficit, which is swelling after Russia’s invasion of Ukraine last week due to soaring energy prices and an expected hit to tourism this year.
After a raft of orders and contracts with Kyiv and Moscow in February, “we face cancellations … [to the value of about] $200m so far [for the industry],” said Seref Fayat, head of garment maker Tobb Clothing and Apparel Industry Assembly. “It could exceed $1bn if this situation continues.”
Turkish trade with Belarus, Moldova and Romania has also cooled due to uncertainty, industry heads said. Some Polish customers asked to suspend orders, while some Russians asked to make payments based on foreign-exchange rates before the invasion and the collapse of the rouble.
Suitcase trade
Turkey’s garments, textile and leather exports totalled $718m to Russia in 2021 and $308m to Ukraine, data show.
The estimated $3bn “suitcase trade” — in which small merchants from Russia, Ukraine and other former Soviet states buy goods in Istanbul, pack them in empty suitcases and resell them back home — has also taken a hit.
“We had already started manufacturing for the new season — but now we have all stopped,” said Giyasettin Eyyupkoca, head of the Association of Industrialists and Business People of Laleli, the Istanbul district at the centre of the suitcase trade.
Turkish President Tayyip Erdogan’s unorthodox economic plan aims to stabilise the lira currency by balancing the current account deficit. But given the Ukraine conflict, Goldman Sachs revised its forecast for this year’s deficit from 1.5% of GDP to 2.5%.
Russians and Ukrainians drive half of Laleli’s annual trade volume, Eyyupkoca said. “I have had the same Ukrainian trading partner for years and an open account with him. How can I now ask him to pay me money while he is struggling to stay alive?” Reuters
IFC to support DTRT Apparel to build sustainable fabric mill, expand Accra factory
By Schalk Burger
Development finance institution the International Finance Corportion (IFC) will support Ghanaian clothing manufacturer DTRT Apparel Group to pursue the development of a sustainable fabric mill and expand its garment manufacturing factory near its operating base in Accra, Ghana..
The IFC team will also explore the potential for the company to produce synthetic fibres and yarns, including from recycled materials, with the aim to advance West Africa’s position as an increasingly competitive global textiles cluster.
DTRT currently employs more than 3 000 staff, predominantly women, at its existing factory in Ghana, making it one of country’s largest private-sector employers.
Despite challenging conditions brought on by Covid-19, the company retained all of its staff throughout the pandemic by pivoting to producing personal protective equipment to support Ghana’s frontline workers. The company increased its sales by 25% in 2021 relative to pre-pandemic levels in 2019.
“Our experience with the pandemic taught us that Africa must and can depend on itself, and we are confident that we can build an integrated textile industry in West Africa to support that goal. The IFC’s expertise will help us draw that roadmap,” says DTRT Apparel co-founder and co-CEO Marc Hansult.
Despite efforts to enhance local value addition, West Africa lacks an integrated textiles value chain and more advanced manufacturing processes. The agreement with DTRT is part of the IFC’s strategy to create new markets, increased exports, and more and better jobs in the West African textiles sector.
“Textile manufacturing has been a creator of better jobs, a driver of exports, and the first rung of higher value manufacturing for many emerging market countries globally. West Africa has an opportunity to become the next global textiles and apparel manufacturing hub, tapping into a $1.5-trillion global market. The IFC is committed to supporting DTRT to make that vision a reality,” said IFC Ghana senior country manager Kyle Kelhofer.
West Africa is the sixth-largest cotton-producing region in the world. The region’s improving economic environment, affordable labour costs, improved and efficient ports, and short transit times to Europe and American markets combine to give the region significant comparative advantages relative to other regions globally.
West Africa has an opportunity to build an integrated textiles value chain, creating thousands of better jobs and introducing innovative sustainable fabric production technologies. EN
HomeChoice – trading statement
Shareholders are therefore advised that headline earnings per share for the financial year ended 31 December 2021 (current period) is expected to be between 20% and 30% higher (between 197.0 cents and 213.5 cents higher) than the 164.2 cents reported for the corresponding financial year ended 31 December 2020 (the previous corresponding period).
The Group’s expected earnings per share is not impacted by the requirements of paragraph 3.4(b) of the JSE LR and, therefore, no specific guidance on the Group’s expected earnings per share for the current period is disclosed.
The Group’s summarised financial results for the year ended 31 December 2021 will be released on the Stock Exchange News Service on 15 March 2022.
The most talked about Oscars dresses of all time
Charlize Theron, 2000
Charlize wowed in a tangerine gown by Vera Wang, but the actress later claimed the bombshell moment had an unintended effect. “I can’t tell you how many times I’ve auditioned for a role, only to have my agent come back and say, ‘Listen, Charlize, they saw you in the orange dress and they don’t think you can do it,’” she explained.
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