Jewellery Division

Positioning

American Swiss Jewellers (ASJ) continues to retain its position as the leading jeweller in the middle-mass market in southern Africa, with Sterns a close second.

The ASJ brand is positioned as glamorous and fashion-forward and these elements are reflected consistently in every touch-point the consumer has with the brand.

Sterns, perceived as a quality jeweller by its customers, is in the process of evolving towards a more contemporary brand. To this end, new formats have been implemented in 22 stores which are reflecting a major increase in turnover per square metre, in some cases as much as 30%. Further, we have signed up a new advertising agency, commencing March 2007, to assist us in aligning the brand image.

Matrix, our sunglasses and cellphone stores, are aimed at a sophisticated, fashionable, brand-conscious customer. We have adjusted the logo and signage in all stores to reflect this increased level of sophistication and have ensured that advertising, store design and brands on offer are consistent in their appeal to this brand-conscious customer.

				2007			% change 52 versus 53 weeks			% change 52 versus 52 weeks			2006
Turnover		American Swiss		622,7			15,2			17,0			540,7
(R million)		Matrix		34,1			28,7			30,8			26,5
		Sterns		365.7			12,1			14,0			326,2
		Total		1 022,5			14,5			16,3			893,4
Number of stores		American Swiss		181			1,1						179
		Matrix		14			-						14
		Sterns		121			5,2						115
		Total		316			2,6						308
Floor Area		American Swiss		12 850			0,7						12 763
(gross m2)		Matrix		508			-						508
		Sterns		8 671			4,4						8 309
		Total		22 029			2,1						21 580
Number of		American Swiss		742			(2,7)						763#
employees		Matrix		54			1,9						53
		Sterns		453			(3,4)						469#
		Total		1 249			(2,8)						1 285

^# 2006 has been restated to include flexi-timers

Review of the Year      

The jewellery division recorded comparable sales growth of 16,3% over the previous year's growth of 18,1%. The drive to reduce the number of off-price events continued across all three chains and resulted in markdown as a percentage of turnover reducing for a sixth consecutive year to only 8,6%of turnover. We believe a level in the region of 9% is ideal.

		2003		2004		2005		2006			2007
Markdown value (Rm)		87,8		83,1		83,8		898,0			96,5
% to sales		13,5		11,5		10,1		9,1			8,6

Operating profits grew in excess of sales growth, thereby further improving productivity ratios.

The past year was marked by the challenge of a huge growth in commodity prices, particularly metals. The gold price jumped by 38% over the past year and required meticulous planning on the part of our merchants in order to ensure that the stores would have the right mix of product for our customers.

Stock turn improved marginally this year to 2,18 from 1,91 last year.

ASJ and Sterns both opened six new stores during the year, whilst ASJ closed four less profitable stores. Average trading densities continue to rise and are running at over R45 000 per square metre compared to last year’s R40 000 per square metre. Revamped stores continue to perform well with sales growths in many cases in excess of 30%.

This last year saw the replacement of two major sets of systems – covering all aspects of merchandise and finance. A considerable effort was expended during the year to ensure that these systems were satisfactorily bedded down.

Strategy

The coming year sees a major focus on each of the individual brands of ASJ, Sterns and Matrix to ensure that all elements of communication, design and offering are aligned and consistently communicated to our staff and consumers. In regard to Sterns, the bedding down of the new advertising agency is the first move that has taken place in this direction.

In line with the brand focus mentioned above, we are also embarking on training programmes in stores and at head office to ensure that all staff are aligned with the brand’s customer focus and core values.

We pride ourselves in the positive, open culture that exists in our division and it is our intention to entrench a “big team” culture where all staff are focused on the customer and on performance. The alignment of head office and store cultures will ensure that the best product is always available to our customers.

Our store location strategy includes continuously monitoring trends, and where economic factors dictate, closures or consolidation will proceed. Locations in new and existing shopping centres where we are under-represented have been identified and new stores will be opened in prime positions. Great care is taken in ensuring that new stores are appropriately sized. The current proliferation of new retail malls is being treated with caution in terms of expansion of the chains. A measured view of expansion is taken, in line with the core strategy of seeking long-term growth in sales and profits.

Management Changes

During the year Adrienne Kleinmann, previously the marketing and merchandise director of our jewellery division, moved as General Manager of this division to replace Ken Schreuder who has moved to head our Group Property division.

Prospects

We expect that the growth in the middle market in southern Africa will continue for the foreseeable future. Our brands are ideally positioned to take advantage of this growth, due to the brand awareness, loyalty and trust that already exist with consumers.

Our new systems will help to ensure that we can better serve our customers’ needs. This combined with training to align staff and brand values, will further ensure that the customer-focused culture is entrenched within each of the brands. With this in mind, we are confident that we can continue to strengthen and grow our market share into the future.

As mentioned above, the past year saw the replacement of major and financial systems, while a new merchandise assortment and planning system has just been implemented in May 2007. The coming see the division commence the exploitation of these systems to merchandise management.