Sports Division

    2008 % change 2007
Turnover Sportscene 414,9 7,4 386,3
(R million) Totalsports 645,4 7,7 599,3
  DueSouth 91,1 18,6 76,8
  Total 1 151,4 8,4 1 062,4
Number Sportscene 90 4,7 86
of stores Totalsports 112 5,7 106
  DueSouth 19 18,8 16
  Total 221 6,3 208
Floor area Sportscene 18 497 6,9 17 296
(gross m2) Totalsports 28 149 8,6 25 925
  DueSouth 6 535 15,9 5 637
  Total 53 181 8,8 48 858
Number of        
employees   1 681 4,2 1 613

Positioning

The sports division, comprising the Totalsports, Sportscene and DueSouth chains, occupies a leading position in its space in the retail sector. It is well represented in shopping centres, CBDs, high streets, and rural towns throughout southern Africa and has built up a high reputation with the sporting fraternities and other interest groups which make up its target markets. It maintains a policy of clear differentiation between the chains in products, presentation and branding, relying for this differentiation on active product innovation and selection and continuous updating of layout and display in the stores.

Totalsports retains its position as South Africa’s premier chain for sportswear and sports equipment. It stocks leading international brands of products to meet the everyday needs of sportsmen and sportswomen, together with complementary fashion products. The chain has well-trained and knowledgeable staff who provide customers with premium-level service in stores where there is a vibrant atmosphere. The main sports and activities for which the chain caters are football, running, fitness and rugby, and customers have a wide choice of contemporary sportswear (including footwear) and equipment.

The Sportscene chain stocks a blend of sports and fashion products directed mainly at youthful and fashion-conscious customers. Initiatives are undertaken outside the stores to keep the chain in touch with its target market. The image it cultivates is that of a fast-paced, urban, street-smart, energised shopping venue.

DueSouth caters for modern, hi-tech, outdoor enthusiasts who enjoy shopping in an environment which stocks a wide range of products that correspond to their lifestyle. The target market comprises adults in the middle to upper income groups. As this is only the fourth year of trading the chain constantly updates its product range in order to cater fully for the market’s tastes and to strengthen its market position.

The sports division continues to be recognised by leading international suppliers of sportswear and sports equipment as a key retail distribution channel in South Africa. While the success of these international products is crucial to its continued growth, the division also supports a number of local manufacturers. In-house brands are furthermore used to provide margin flexibility and to enhance growth.

Review of the year

Trading conditions in the past year proved to be difficult and obstacle-ridden. The implementation of the National Credit Act (NCA) in June, in combination with higher inflation and rising interest rates, severely dented consumer confidence. Power outages disrupted shopping patterns and reduced the division’s ability to provide its normal level of service. Rising fuel costs and a surge in inflation adversely affected expenses, necessitating an increased focus on expense control and efficiencies. In addition, new and aggressive players have entered the retail market for sportswear and sports equipment.

Despite this unfavourable climate the division achieved total turnover growth of 8,4% and same store growth of 3,7%, ensuring that the division maintained its position as a market leader. A total of 17 new stores were opened, including two on a franchised basis at Cape Town International airport, thus positioning the division for growth in the future.

The division’s markdown levels have remained well controlled and at acceptable levels.

  2004 2005 2006 2007 2008
Markdown value (Rm) 80,1 92,7 132,0 133,8 160,8
% to sales 12,0 11,5 12,8 11,1 12,3

Throughout the year the division continued to stock and display the latest products available in the market, both in sportswear and equipment. Emphasis was again placed on training programmes for the staff in order to ensure that customers entering the stores will receive technically competent and superior all-round service. In co-operation with suppliers of major ranges of products the division also participated in the launching of new products on to the southern African market. This is a strategic process to attain first-to-market status and reputation.

The division’s involvement in the group’s supply chain initiative, which is not yet at a final stage, resulted in reduced lead times and enabled its stores to be first-to-market with some new products. Close collaboration with suppliers of products and with the Group Logistics division also led to some reduction in the time which merchandise spends in the group’s distribution centres, and a significant proportion of footwear was shipped directly from the factories of manufacture to a distribution centre of the group. This type of innovation results in the elimination of duplicate processing and hence reduces costs.

Totalsports

Totalsports achieved turnover growth of 7,7% for the year, with same store growth of 3,5%. Its expansion policy continued and six new stores were opened and ten stores were refurbished.

Rugby has been added to football, fitness and running as a key sport in the strategy of this chain. This step recognises the growing popularity which rugby enjoys as a mass participation sport in southern Africa, boosted by the Springboks’ successes in the most recent World Cup series.

Streamlining was undertaken to remove overlapping and substitutable product lines and add others in order to remain relevant to key sports categories. The objective has been to ensure a clearly-defined offering by sport and gender.

Another innovation was the broadening of the range of Fusion products by the introduction of new core products in apparel, accessories and equipment.

The Totalsports chain also increased its participation in co-operative events with manufacturers and distributors of internationally-branded products in order to reinforce relationships both with these suppliers and with the public, and to raise awareness of the availability of these products in the stores. These relationships and the resulting consumer awareness will be important in the build-up to World Cup 2010 and to the business climate confronting Totalsports in later years.

Because of the growing public enthusiasm for World Cup 2010, the chain has expanded yet further its involvement in grassroots football events, interacting with more than 100 football clubs at various levels. These initiatives with the target market are supplemented by sports clinics for the staff of the chain, so building up the knowledge base and increasing commitment and energy at the store level.

Totalsports is the South African retail football partner of choice for the suppliers of several major ranges of sportswear and sports equipment, and it will use this competitive edge to maximise sales and market penetration.

Sportscene

Competition intensified in South Africa in the past year, particularly as a result of the further advance of international market participants.

The youth fashion market has received increasing recognition internationally as presenting opportunities for suppliers of major brands of sports products. This has led to the arrival of waves of new products. The suppliers have globally intensified their marketing activities and they compete aggressively with each other for retail presence, whether in the increasingly common own-brand stores or in the stores of traditional retailers. They take global initiatives in strategic direction, the ranges of products offered, and promotional activities.

The result in South Africa for retailers such as the Sportscene chain has been increased competition but also the prospect of a growing market.

The Sportscene chain has played a part in this drive of the big international players by participating in the introduction of new products through launch campaigns and other promotional activities, so ensuring that it would be first-to-market and would gain publicity in its own right.

The relentless pace of change in the youth market requires ongoing review of the chain’s marketing strategy. This brings about continuing change in the “look and feel” of marketing communication in order to keep it in step with fashion and hence deal effectively with competition.

A more intensive focus on footwear, aimed at enhancing the division’s leading position in this product category, has paid dividends. The division’s Redbat range continues to expand with the introduction of new items for women and men. The range of accessories under this trademark has been streamlined.

Sportscene opened six new stores during the year and refurbished nine stores, whilst closing two non-performing stores. The franchised store at the Cape Town International Airport was converted to a Totalsports format.

In a year of volatile trading conditions the chain’s turnover grew by 7,4%, with same store growth of 3,0%.

DueSouth

DueSouth, the newest of the division’s chains, continued to gain public awareness and to strengthen its reputation in the outdoor lifestyle market. Growing popularity of the chain’s exclusive international ranges, The North Face and Columbia, has helped to enhance its market position. The chain also provides products under the in-house DueSouth trademark, which play an accessible alternative and complementary role.

The product range continues to evolve, and in the past year additional well-recognised internationally-known apparel and footwear, both for women and men, were introduced, together with an enhanced range of accessories and equipment.

Following a review of the chain’s stores a programme was started to enhance store presentation through increased lighting and the re-configuration of shopfronts. A visual merchandising initiative was also undertaken to demarcate clearly the lifestyle and performance areas within the stores and to identify the trail-running, mountain-biking, outdoor and exploration categories of products. It is clear that these changes have been welcomed by customers and that they serve to enhance the character and individuality of the DueSouth stores.

DueSouth continues to expand and four new stores were opened in the past year, including a franchised airport store.

Sales growth was encouraging at 18,6%, with same store growth of 7,7%.

Strategy

All of the chains in the division are given equal opportunities to achieve their best possible performance.

In the Totalsports chain there will be emphasis in the coming year on providing an optimal selection of products in the sports for which it caters, presented to customers in attractive and simple-to-find displays. Intensified focus will be placed on apparel for women and on certain other product lines for which there is at present particularly strong demand.

Totalsports’ status in the football sector as a preferred retail partner for major suppliers will provide a strong platform to establish both exclusive and competitive positions for the acquisition and marketing of products. The window of opportunity presented by the World Cup 2010 and the marketing drive of the major sporting suppliers in this regard will allow the chain to progress yet further in building its reputation.

There will be continued interaction with the customer base through targeted local events, promotional initiatives around the introduction of new products, and the division’s own national event sponsorships. These are all tools to gain top-of-mind awareness in the marketplace.

In the Sportscene chain, following from the above-mentioned strategy review, there will be ongoing action to keep the chain aligned with its fast-moving target youth market. Emphasis will continue on building strength in the footwear category and in strengthening the chain’s position in popular internationally-branded products. There will also be a continued drive to position Redbat as a wanted brand.

DueSouth will retain its existing objectives and its product ranges will be supplemented by new products and new categories of products. Sponsorship of the DueSouth Xterra Multisport event will continue.

The division is participating actively in the group’s supply chain initiative with the objective of bringing products into the stores faster and thus improving efficiency and stock turn. Buying decisions can then be made later than in the past, helping the division in its drive to be the first-to-market with newly launched products.

Good expansion opportunities have been identified in several geographical regions and the division intends to open nine Totalsports, eleven Sportscene and six DueSouth stores.

Store statistics 2004 2005 2006 2007 2008*
Totalsports 92 94 97 106 112
Sportscene 70 74 79 86 90
DueSouth – 9 14 16 19
Total No. of stores 162 177 190 208 221
Closures 3 2 2 – 2
Floor area (m2) 35 691 40 643 44 221 48 858 53 181
         
                   Projection
Store statistics 2009* 2010*
Totalsports 121 128
Sportscene 101 106
DueSouth 25 30
Total No. of stores 247 264
Closures – –
Floor area (m2) 60 577 65 347
* Excludes 2 franchise stores at CPT International Airport.

Prospects

Trading conditions are expected to remain difficult in the new financial year as a result of rising interest rates, rising inflation and the continued effects of the NCA. In spite of these conditions the division expects to produce moderate growth, and investment in the business for the future is continuing.