Jewellery Division

Positioning

The Foschini group jewellery division is the leading player in the mass middle market for jewellery and branded accessories. It has attained this position by offering attractive retail environments, extensive product ranges, desirable brands and great service. Measured by number of stores, American Swiss Jewellers is the largest jewellery chain in southern Africa, followed by Sterns. American Swiss and Sterns have each traded successfully for more than 100 years and as a result have built up large and loyal followings in the marketplace. In-house credit accounts for 60% of total sales.

The division strives continually to differentiate the products it stocks in order to offer real choice to customers. The division obtains merchandise from around the world, including products designed and manufactured locally for the southern African market, so ensuring that there is ongoing innovation and trend-setting.

  2008 % change 2007
   Turnover American Swiss 663,4 6,5 622,7
   (R million) Matrix 38,8 13,8 34,1
       Sterns 388,5 6,2 365,7
       Total 1 090,7 6,7 1 022,5
   Number American Swiss 187 3,3 181
   of stores Matrix 19 35,7 14
       Sterns 122 0,8 121
       Total 328 3,8 316
   Floor area American Swiss 13 274 3,3 12 850
   (gross m2) Matrix 625 23,0 508
       Sterns 8 620 (0,6) 8 671
       Total 22 519 2,2 22 029
   Number of American Swiss 762 2,7 742
   employees Matrix 59 9,3 54
       Sterns 463 2,2 453
       Total 1 284 2,8 1 249

The American Swiss brand is positioned to appeal to the fashion-forward and image-conscious customer, and offers consumers in the growing middle market appropriate products and brands to express their status. The American Swiss brand is highly visible in shopping centres and in the media, making its fashion statements with confidence and flair.

Sterns is a contemporary and classic jeweller, well known to the market for its quality and welcoming service, offering beautiful and meaningful jewellery. The Sterns brand is in the process of being repositioned to be more in line with trends in contemporary merchandise.

Matrix, the division’s sunglasses and cellphones chain, caters for the brand-savvy and image-conscious consumer who aspires to designer labels.

Review of the year

The division’s sales growth of 6,7% for the year was lower than the previous year’s growth of 16,3%, but nevertheless represents an acceptable result in a year of substantially higher metal prices, higher interest rates, higher inflation and the effects of the implementation of the National Credit Act (NCA). Despite having to contend with these negative factors, the division maintained the markdown to sales percentage for the year below 9%, which it considers to be the optimum level.

  2004 2005 2006 2007 2008
Markdown value (Rm) 83,1 83,8 89,0 96,5 119,4
% to sales 11,5 10,1 9,1 8,6 8,8

Operating profits grew at a rate in excess of the rate of sales growth, thereby improving profitability ratios.

The division had a good start to the year, with impressive double-digit growth during the first months. Because the NCA came into force at a time of interest rate increases, a decline in the rate of growth set in. To contend with this, merchandise purchases were accordingly adjusted. The remainder of the year saw further increases in interest and inflation rates and spiralling growth in commodity prices, particularly metals. The gold price jumped by more than 30% during the year under review and judicious planning on the part of the division’s merchants was again needed in order to ensure that the stores would have a suitable product mix for their customers.

Stock levels were affected by the factors described above and this resulted in a reduction in stock turn to 1,9 from 2,2 last year. Strategies have been devised to push this back to more than 2,0 in the next year.

The division opened 19 new stores in the year under review (American Swiss 8, Sterns 5, Matrix 6), and 7 underperforming stores were closed (American Swiss 2, Sterns 4, Matrix 1).

Average trading densities continue to rise and are running at more than R48 000 per square metre compared to last year’s R46 000 per square metre.

Strategy

The new financial year calls for reliance on the strength of each of the American Swiss, Sterns and Matrix brands. All elements of communication, design and service will be aligned accordingly and consistently communicated to our personnel and consumers. American Swiss will maintain its role as a fashion jeweller while adding new brands and differentiated products. Sterns will continue its move to contemporary status while also adding its own new product lines. A new store format for Sterns will be implemented at the beginning of the financial year and will be rolled out to all new stores after feedback and review. Existing stores will receive corresponding treatment over a period. This will complete the repositioning of Sterns as a contemporary brand with consistency between products, advertising and store design. Matrix will be investigating alternative store formats to increase its product roll-out potential.

Customer service is a key differentiator and, in line with the brand focus mentioned above, the division is continuing to improve the training programmes given in stores and at the group’s head office in order to ensure that all personnel are aligned with the brand’s customer focus and core values.

Supply chain management is a key factor and the division intends to pursue a supplier pipeline that has greater flexibility and shorter lead times than have prevailed in the past. This should result in improved decision-making and operational efficiency.

The division’s store location strategy includes the continuous monitoring of performance trends, and where economic factors so dictate, closures or consolidation will proceed. Locations in new and existing shopping centres where the division’s stores 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. A measured view of expansion is taken, in line with the core strategy of seeking long-term growth in sales and profit.

Store statistics 2004 2005 2006 2007 2008
American Swiss 175 175 179 181 187
Sterns 114 115 115 121 122
Matrix 9 12 14 14 19
Total No. of stores 298 302 308 316 328
Closures 15 6 3 4 7
Floor area (m2) 21 123 21 189 21 580 22 029 22 519
           
                    Projection
Store statistics 2009 2010
American Swiss 197 205
Sterns 134 143
Matrix 24 29
Total No. of stores 355 377
Closures 3 3
Floor area (m2) 23 859 24 899

Prospects

Despite the current economic slowdown, the division expects that growth in the middle market in southern Africa will continue for the foreseeable future. The Foschini group jewellery division is well positioned to take advantage of this growth, considering the brand awareness, loyalty and trust that already exist among consumers.

These factors, combined with training to align personnel and brand values, will further ensure that a customer-centric culture is entrenched within each of the brands. With this in prospect, the division is confident that it can continue to strengthen and grow.