annual report 2009
Manie Maritz
Markham
POSITIONING
Markham is the largest men’s fashion retail chain in southern Africa. Markham stores are located in most major shopping centres and towns in this territory. In its endeavour to make its customers ’feel great, look good, and share our passion for style’, Markham provides up-to-date, internationally-inspired menswear of good quality and value, suitable for all occasions and daily experiences. This is done from conveniently accessible stores, most of which offer a full range of menswear, while others, like the smaller-format Markham Relay stores, offer fashion casualwear only.
The Markham Relay format stores are used in locations that do not warrant a fully-fledged Markham offering. These are generally new malls on the outskirts of large towns, in second or third stores in city CBDs, and second stores in large malls where it is not possible to expand an existing Markham store.
While the division targets the LSM 6 – 10 range, the LSM 3 – 5 categories are also buyers of its stylish apparel. Increasingly, shoppers tend to be younger men, often in the age group 19 – 25.
| 2009 | % change | 2008 | |
| Turnover (R million) | 1 311,7 | 10,1 | 1 190,9 |
| Number of stores | 223 | 10,9 | 201 |
| Floor area (gross m2) | 67 889 | 10,8 | 61 298 |
| Number of employees | 1 467 | 7,6 | 1 364 |
REVIEW OF THE YEAR
Despite the weakness which prevailed in the economy for most of the year, total sales in the Markham stores improved by 10,1% for the year, with same store sales growth of 4,0%. Winter garments enjoyed exceptionally good sales but there was also strong demand for fashionable casual summerwear. Although prices effectively remained constant, changes in the product mix resulted in 7% product inflation. Performance in cell phones was disappointing because of supply issues from MTN which caused a shortage of key types of stock. Sales growth was 2,7%, representing 15,8% of turnover.
Continued close control of markdowns and of expenses resulted in a further increase in profitability.
Markdowns made up 7,5% of sales. From trends known at this stage this level of markdowns is unlikely to be sustainable into the future, but should nonetheless remain at very good levels. The table below sets out the apparel markdown history.
| 2005 | 2006 | 2007 | 2008 | 2009 | |
| Markdown value (Rm) | 95,0 | 106,6 | 99,2 | 97,1 | 94,3 |
| % of sales | 12,4 | 11,7 | 10,5 | 9,8 | 7,5 |
The fruits of the division’s brand repositioning, which commenced in the second half of 2005, have again exceeded expectations. The fashion and quality expectations of customers visiting the division’s stores have been raised and turnover levels and profitably have improved significantly. A marked increase in cash sales has indicated that Markham is attracting new customers.
During the year 22 new stores were added and a further nine were relocated or enlarged. Of the new stores, four are in the Markham Relay format, which now has a total of 12.
The performance of all new stores was better than had been expected.
STRATEGY
The major repositioning of the Markham brand mentioned above has the objective of ensuring that Markham remains a relevant, aspirational brand, recognised for delivering fashion and style in a sophisticated shopping environment. This is a continuing exercise since it involves an extensive refurbishment of stores and this process must be spread over a number of years.
Formalwear is also now well positioned in the division and continuing growth in this area is being targeted.
Space availability is one of the factors that set a ceiling on the growth of the division in the past. A full-line Markham store requires a substantial floor area and this has been unavailable in some malls in which the division would have liked to have stores. The current slower economic conditions should provide opportunities to open full-line Markham stores where there are prospects of good sales, as well as to take opportunities to right-size and open smaller stores where this is justified. More than 14 stores will be opened in the next year.
Alongside the roll-out of new stores in both the Markham and Markham Relay formats there will be strong emphasis on cost controls in a drive to enhance profitability. Training programmes for all staff members will be continued in order to ensure that customers receive insightful and efficient service and that the Markham reputation is enhanced.
In addition to the activities described above, the division will implement the next phase of the group’s supply chain initiatives to reduce lead times for merchandise procurement and improve stock turns with the objective of enhancing the division’s ability to react quickly to changing trends. There will also be emphasis on better fulfilment of customers’ size requirements, utilising for the second year the group’s size-management software which is designed to ensure that the size ranges of stock arriving at a store will correspond to historical sales.
The men’s fashion arena has limited local manufacturing capability but there are fortunately a few sizeable companies in the Western Cape with whom good relationships exist and from whom good volumes of the division’s supplies can be obtained.
Replenishment stock, replacing items recently sold, accounts for 17% of the division’s turnover.
The division’s efforts to develop closer relationships with domestic suppliers in order to increase the level of local production will continue. Greater reliance on local manufacture implies reduced vulnerability to adverse changes in the exchange rate of the Rand, and this is a longer-term goal.
PROSPECTS
Menswear is by no means immune to the current poor economic conditions, and stores in smaller towns where there has been much retrenchment, such as some mining towns, cannot but fail to feel the pinch. However, the continuing roll-out of new Markham and Markham Relay stores, combined with better fulfilment of customers’ size requirements and the upgrading of the fashion levels of stock, is expected to ensure that the division will again perform well in the next year.
The first Markham store at an airport, namely the OR Tambo airport in Gauteng, was opened in the past year and it, and others which may follow elsewhere, should assist the division in broadening the range of customers it attracts.
The Markham division will be one of the beneficiaries of the group’s supply chain initiative, aimed at reducing lead times and in-warehouse times. Benefits are already flowing from this initiative, which will continue throughout the next year and which should assist in improving the financial performance of the division.
| Store statistics | Projection | ||||||
| 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | |
| Markham | 177 | 180 | 191 | 201 | 223 | 237 | 247 |
| RJL | 38 | 28 | – | – | – | – | – |
| Total no. of stores | 215 | 208 | 191 | 201 | 223 | 237 | 247 |
| Closures | 3 | 13 | 29 | – | – | – | – |
| Floor area (m2) | 58 538 | 58 764 | 58 230 | 61 298 | 67 889 | 71 503 | 74 503 |
