The Foschini division is the primary ladieswear fashion retailer within the group and comprises the following brands:
Foschini – Ladieswear retail store offering contemporary clothing, footwear and cosmetics, at good value, in an environment which is modern and friendly. Target market is 18 – 35 year olds within LSM 6 – 10. Located in prime shopping centres and CBDs.
Donna-claire – designed to cater for larger-sized women, yet still offering fashionable clothing. Located in prime shopping centres, catering for LSM 6 – 10.
Fashíonexpress – Ladieswear chain located in smaller towns and B positions in shopping centres, catering for LSM 5 – 9 and offering value clothing and footwear.
Luella – this recently created standalone footwear chain offers mid-range footwear in a modern international store format catering for LSM 6 – 10. So far 18 stores have been opened in prime shopping malls and are showing good potential.
| % change | % change | ||||||||
| 52 versus | 52 versus | ||||||||
| 2007 | 53 weeks | 52 weeks | 2006 | ||||||
| Turnover | Foschini | 2 307,3 | 7,3 | 9,5 | 2 151,1 | ||||
| (R million) | Fashíonexpress | 273,9 | 11,0 | 12,5 | 246,8 | ||||
| Donna-claire | 303,0 | 18,3 | 20,5 | 256,2 | |||||
| Luella | 27,6 | 324,6 | 326,8 | 6,5 | |||||
| Total | 2 911,8 | 9,4 | 11,6 | 2 660,6 | |||||
| Number | Foschini | 208 | 3,0 | 202 | |||||
| of stores | Fashíonexpress | 96 | 7,9 | 89 | |||||
| Donna-claire | 64 | 8,5 | 59 | ||||||
| Luella | 18 | 200,0 | 6 | ||||||
| Total | 386 | 8,4 | 356 | ||||||
| Floor area | Foschini | 131 308 | 7,2 | 122 510 | |||||
| (gross m2) | Fashíonexpress | 27 742 | 10,3 | 25 152 | |||||
| Donna-claire | 16 520 | 9,5 | 15 085 | ||||||
| Luella | 2 636 | 175,7 | 956 | ||||||
| Total | 178 206 | 8,9 | 163 703 | ||||||
| Number of | Foschini | 3 991 | 11,1 | 3 593 | |||||
| employees | Fashíonexpress | 579 | 15,6 | 501 | |||||
| Donna-claire | 442 | 20,4 | 367 | ||||||
| Luella | 111 | 170,7 | 41 | ||||||
| Total | 5 123 | 13,8 | 4 502 |
The high level of development of retail space in South Africa continued during 2007 with the following new major regional shopping centres opening during the year:
Diamond Pavilion – Kimberley
Vaal Mall – Vanderbijlpark
Jabulani Mall – Soweto
In total 33 new stores were added across the division’s four brands during 2007. In addition a further 16 stores were enlarged or relocated. Altogether an additional 14 503 square metres of retail space was added during the year – a growth of 8,9% on 2006.
Generally trading remained buoyant during the year. The division’s overall sales growth started off well, growing by 16,5% for the first four months of the year to July. However, from August to November which is our key opening summer period, sales were negatively impacted by stock shortages. This was primarily as a result of changes to the in-house manufacturing process which is detailed below. During these four months the division struggled and sales grew by only 7% on the comparable period – representing around R100 million in lost turnover. By December the situation had improved and for the last four months of the year the sales grew by 12%, resulting in full year sales being up 11,6% on the comparable 2006 year.
Our cosmetics business continues to grow very well, gaining market share, with a growth this year of 23%. Cosmetics turnover is now in excess of R430 million annually.
Foschini is the second biggest departmental retailer of cosmetics in South Africa, representing the major international brands such as Clinique, Revlon, Elizabeth Arden, Yardley and L’Oreal. In most of the new-format shopping centre stores, the cosmetics departments have their own entrance, creating a standalone feel, and thereby increasing the footfall and benefiting the other departments within Foschini.
Markdowns for the year at 15,1% remained at the same level as last year, which is at an acceptable level relative to sales, well down from the highs of over 20% experienced previously. Our medium-term goal remains to reduce clothing and footwear markdowns to between 10% and 12% of sales.
| 2003 | 2004 | 2005 | 2006 | 2007 | ||
| Markdown value (Rm) | 224,9 | 304,0 | 266,7 | 349,3 | 371,0 | |
| % to sales | 14,8 | 18,5 | 13,3 | 15,1 | 15,1 |
During 2007 the in-house design and manufacturing arm of the group, TFG Apparel Supply Company, was restructured into four separate design units, each unit operating as a profit centre with a gross profit objective. The restructuring was the first step in re-engineering our in-house supply chain in order to shorten lead times and increase flexibility. However, the change-over resulted in delivery problems and significant stock shortages for the summer season. These issues have been resolved and the benefits of these smaller focused units are already being seen in terms of more appropriate ranges reaching our stores.
We believe that a strong local design and manufacturing industry is required in South Africa and by strategically realigning our in-house processes, we will create an opportunity for growth in this area going forward.
Overall comparable sales in Foschini grew by 9,5%, as Foschini was the brand most impacted by the stock shortages. The comparable same store sales within Foschini grew by 8,6% for the first four months to July, but during the opening summer period of August to November same stores were down 2,1%. The period from December to March was better at 3,4% growth resulting in an overall comparable same store growth of 3,2% for the year.
Some older stores were also impacted by the new regional shopping centres drawing customers from traditional shopping locations, typically CBDs. The largest impact came from the old stores close to the following recently opened centres:
Maerua Mall – Windhoek
Diamond Pavilion – Kimberley
Garden Route Mall – George
Vaal Mall – Vanderbijlpark
Paarl Mall – Paarl
Excluding the stores impacted by these centres, the remainder of the Foschini older stores grew comparable same store turnover by 5,0%.
Eight new stores were opened during the year and a further eleven were upgraded, taking the total number of new-concept stores to 96 at year-end.
The new-concept stores continue to perform well above the chain average, both in terms of sales growths and trading densities, and now represent close to 70% of the brand’s total turnover.
| Performance by store concept | New concept | Old format | |
| Number of stores | 96 | 112 | |
| Sales growth (%) | 14,5 | 1,0 | |
| Sales contribution (%) | 66 | 34 | |
| Trading density/m2 (incl. VAT) | R22 950 | R16 050 | |
| Total number of stores | 208 | ||
Total trading space in terms of rented square metres grew by 7,2% to 131 308 square metres and we saw a continued improvement in trading densities and increased profitability.
Whilst the large number of new shopping centre developments currently being undertaken in South Africa is assisting the overall growth of Foschini, we have seen a certain amount of cannibalisation as new centres draw customers from traditional shopping locations as detailed above. This has more of an impact on an established brand like Foschini with a large, well-spread store base. However, we have found that even the impacted stores are still highly profitable, usually with lower rentals, and once the new centres have become established we are able to grow sales in both locations.
During 2007 almost R30 million in capital expenditure was incurred on upgrading existing Foschini stores through enlargements, relocations or revamps. These upgraded stores have shown very good growths and strengthen the brand’s position in these existing centres.
We have an encouraging new store plan for 2008 with the following new stores already committed:
Greenstone – Modderfontein,
Johannesburg
Irene – Centurion,
Pretoria
Loch Logan – Bloemfontein
Maponya – Soweto
Hillcrest – Durban
This is in addition to a number of enlargements and revamps planned over this period.
We will also open a Foschini store in the V&A Waterfront in October 2007 which has been much awaited, as until now, we have been unable to find suitable space in that location.
In terms of our merchandise offering, our ranges achieved very good clearances, with markdowns at acceptable levels, indicating an acceptance of our fashion/value proposition. We are confident that the merchandise strategies, structures and processes that we have evolved will continue to deliver improving performance.
This value chain, created initially out of ailing Foschini stores, has established itself successfully. Built around the concept of “express yourself for less”, this ladieswear-focused chain offers fashionable garments in a pleasant shopping environment at prices that rival the traditional cash retailers.
Overall comparable sales grew by 12,5% with comparable same stores up 3,5%.
A new store concept has been established that will allow the brand to have a consistent handwriting across all the locations and this will be rolled out to existing stores over the next two years.
During 2007 eight new stores were opened, and a further six are planned for the year ahead. With the closure of unprofitable stores now behind us (70 unprofitable stores were closed over a five-year period), we are confident that this chain will continue to grow its profit contribution. By the end of 2008 there will be over 100 fashíonexpress stores.
Comparable sales for this chain grew by 20,5%, assisted by five new store openings. The comparable same store growth at 8,1% was encouraging, with big improvements having been made in the merchandise ranges, thereby offering more appropriate fashionability.
With nine stores already committed in 2008 and another ten stores earmarked for 2009, this niche chain will grow to over 80 stores within the next two years.
With their high trading densities and low markdowns, Donna-claire stores are the most profitable stores in the division.
This recently created standalone footwear concept offers a range of ladies footwear, handbags and accessories aimed at the middle to upper income market. The target market is the high fashion conscious woman who “has a thing” for shoes.
During 2007 a further 12 new Luella stores were opened, taking the chain to 18 stores nationwide, all in key shopping centres.
With the expected improvements in the fashion ranges, we are confident that Luella will within the next three years, become a meaningful contributor to the division’s profit. Potentially this could be a 50-store chain, located in prime shopping centres and catering for LSM 6 – 10.
The division’s structural re-engineering in terms of brands has now been completed. The footprint of the Foschini brand has been significantly increased in most major shopping centres and Donna-claire has been aggressively rolled out since the 2000 financial year. This expansion has been offset by the closure of almost 80 unprofitable stores over the last six years. This strategy has allowed us to significantly improve our store base without a large increase in rented space, thereby increasing trading densities and profitability.
A solid site foundation is now in place from which we can fully exploit the growth opportunities offered by our brands: Foschini, Donna-claire, fashíonexpress and Luella. All of these brands are far from overexposed and existing strategies, together with a robust economy, should ensure strong sales growths going forward. The positioning of our brands allows flexibility in entering new retail space. Experience has shown smaller Foschini stores of less than 1 000 square metres in marginal centres have underperformed, whereas fashíonexpress is far more suited to and successful in such centres.
| Projection | |||||||||
| Store statistics | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | ||
| Foschini | 197 | 197 | 196 | 202 | 208 | 214 | 218 | ||
| Fashíonexpress | 97 | 89 | 86 | 89 | 96 | 102 | 106 | ||
| Donna-claire | 44 | 48 | 53 | 59 | 64 | 73 | 83 | ||
| Luella | – | – | – | 6 | 18 | 20 | 22 | ||
| Total no. of stores | 338 | 334 | 335 | 356 | 386 | 409 | 429 | ||
| Closures | 15 | 11 | 15 | 6 | 3 | – | – | ||
| Floor area (m2) | 151 313 | 152 767 | 154 025 | 163 703 | 178 206 | 192 000 | 203 000 | ||
We are constantly striving to improve our ability to supply fashion-right garments to our stores and react to changing consumer trends. Merchandise performance improvements will be attained by focusing on developing our people and having access to an exclusive supply base that is able to react more quickly and appropriately to changing customer demands.
The merchandise buying teams have been strengthened by the creation of additional middle management positions and the introduction of a comprehensive in-house trainee programme.
Abigail Bisogno who has been the managing director of our Exact! division for many years, will be moving to our Foschini division as managing director, to fill the gap which will be left by Simon Bowley.
The problems experienced in 2007 with restructuring the in-house design and manufacturing units have now been resolved and we are confident about our sales growth on the back of the poor performance in summer 2006.
South African consumer confidence remains high in spite of the interest rate increases last year and whilst the overall debt levels taken on by consumers have increased, they are still well below international levels.
Our investment in capital expenditure in terms of new stores and the refurbishment of existing stores will allow us to capitalise on South Africa’s economic growth. Overall in the year ahead, we have committed to opening over 20 new stores and to the upgrade of approximately another 20 stores, adding in the region of 14 000 square metres of new retail space. We believe all brands are now well positioned within the markets in which they operate and as such are well poised for strong growth going forward.
