FOSCHINI
Abigail Bisogno
The Foschini division remains the primary womenswear fashion division in the group.
POSITIONING
The Foschini division is the womenswear fashion division in the group, comprising the Foschini, fashíonexpress, donna-claire and Luella chains.
Foschini supplies contemporary clothing, footwear and cosmetics, its target market being 18 to 35 year olds in the LSM 6 – 10 categories. Foschini stores are located in prime shopping centres and CBDs.
fashíonexpress is a value chain, supplying clothing and footwear for customers in the LSM 5 – 9 categories. Its stores are located in smaller towns and in secondary positions in shopping centres.
donna-claire supplies fashionable clothing for larger-sized women of all ages. The target market is the LSM 6 – 10 categories. Most of the stores are located in prime shopping centres, with a recent roll-out to secondary malls and some CBDs.
Luella, a relatively new chain, is devoted to footwear and handbags, offering reasonably priced products in a modern international store format. All the Luella stores are in key shopping centres.
REVIEW OF THE YEAR
In total, 27 new stores were opened during the 2010 year across the division’s four chains. In addition, nine stores were enlarged or relocated.
A total of almost 12 000 square metres of retail space was added during the year, representing growth of 5,6%.
The largest developments were in the following shopping centres:
| Hemmingways | a new regional centre in East London |
|---|---|
| Amanzimtoti | a new regional centre south of Durban |
| The reds | an extension to the existing mall in Centurion |
| The Grove | a new centre in Pretoria East |
Stores were also opened in smaller centres including Gugulethu Square, Mafikeng Mall, Limpopo Mall and Bridge City.
| 2010 | % change | 2009 | ||
| Turnover (R million) | Foschini | 2 560,4 | 6,6 | 2 402,5 |
| fashíonexpress | 396,9 | 14,3 | 347,2 | |
| donna-claire | 310,0 | (4,8) | 325,5 | |
| Luella | 38,7 | 36,7 | 28,3 | |
| Total | 3 306,0 | 6,5 | 3 103,5 | |
| Number of stores | Foschini | 223 | 2,8 | 217 |
| fashíonexpress | 126 | 9,6 | 115 | |
| donna-claire | 88 | 7,3 | 82 | |
| Luella | 17 | (5,6) | 18 | |
| Total | 454 | 5,1 | 432 | |
| Floor area (gross m2) | Foschini | 159 343 | 5,0 | 151 728 |
| fashíonexpress | 36 836 | 7,6 | 34 221 | |
| donna-claire | 23 949 | 8,3 | 22 106 | |
| Luella | 2 426 | (6,8) | 2 604 | |
| Total | 222 554 | 5,6 | 210 659 | |
| Number of employees | Foschini | 4 059 | (1,8) | 4 133 |
| fashíonexpress | 626 | 4,5 | 599 | |
| donna-claire | 503 | 1,8 | 494 | |
| Luella | 89 | (6,3) | 95 | |
| Total | 5 277 | (0,8) | 5 321 | |
| Most significant countries from which merchandise is imported | China | China | ||
The adverse economic conditions experienced towards the end of the previous year continued into the 2010 year. In spite of this unfavourable economic climate the division achieved creditable turnover growth of 11,0% in the first half, thanks largely to a winter range which was more successful with customers than had been the winter range of the previous year.
From October 2009, with the onset of summer, a slow-down in consumer demand became more evident. This was exacerbated by a shortage the division experienced of casualwear products in a season where the trend was towards casual product. The division’s formal fashion-directed brands such as Oasis and WWW struggled, while the casual labels News and Instinct enjoyed a lift in sales. Turnover in the second half grew by 2,5%, with the result that growth for the full year was 6,5%.
Investing in talent development is an ongoing focus to ensure a supply of talent and skills to meet the division’s business requirements. Details on the group’s human resource activities – including employment equity, skills development, and occupational health and safety – are provided in the Human Resources review.
Progress has again been made in the group’s supply chain initiative, with tangible benefits in terms of the time spent by merchandise in the division’s distribution centre and elsewhere in the supply chain. Further details on the nature of our supply chain management and auditing activities are provided in Supply Chain and Group Merchandise Procurement reviews. The aim of these activities is to ensure reliability, speed, quality, value and flexibility in our supplier relationships, while also maintaining appropriate ethical, labour and environmental performance standards amongst suppliers.
Cosmetics
The cosmetics business has continued its steady growth and turnover in the full year rose by 13,1%, with growth in comparable stores of 8,7%. Turnover in this category now exceeds R600 million.
The Foschini cosmetics range brings together a number of major international brands including Clinique, Elizabeth Arden, L’Oreal, Revlon and Yardley. In most of the new-format stores in shopping centres the cosmetics departments have their own entrance, creating a standalone ambience. It has once again been shown that this layout increases footfall and benefits the other departments of the Foschini stores.
Cellular products
Cellphones had a disappointing year. After numerous years of double-digit growth the business contracted by 8,2%. Turnover was R230 million as against R250 million in the previous year.
Prior to 2010, the group’s strategy was to act as an exclusive MTN retailer selling the handsets of all manufacturers on a prepaid basis. Sales declined, largely because of stock shortages on the part of MTN which persisted until two months before the end of 2009.
During the past year Vodacom was introduced into selected stores. This introduction was completed by the end of 2009 and MTN’s stock issues had also by then improved. It was encouraging to observe a prompt positive response, with sales growths of 32% being achieved in February and 16% in March.
With the recent creation of the Group Technology division the cellular department within the Foschini division will be managed centrally.
Foschini
Clothing sales in the Foschini chain grew by 7,0% year on year. The contrasting winter and summer performance was most pronounced in this chain, with first half sales rising 14,5% and sales in the second half showing no growth over the comparative period of the previous year.
Total turnover of the chain, including the Cosmetics and Cellular departments, grew by 6,6% over the full year.
Nine new Foschini stores were opened during the year, the most significant of these being the Galleria Mall in Amanzimtoti, The Grove in Pretoria and Hemmingways in East London. All of these are stores of more than 1 000 square metres in area.
The new stores have traded below their potential as customers take time to change their shopping patterns by gravitating away from earlier shopping venues.
fashíonexpress
This value chain, created initially out of smaller Foschini stores, had another good year and has become well established in the market-place. Built around the concept of “express yourself for less”, this chain offers fashionable garments in a pleasant shopping environment at prices that rival those of traditional cash retailers.
Total turnover grew by 14,3%, with comparable store turnover rising by 4,5%. fashíonexpress achieved consistent sales over the year, the increase being 14,7% in the first half and 14,0% in the second.
The new store format has been widely accepted and will continue to be rolled out both in newly opened stores and in the course of conversion of existing older stores. Once completed, this programme will make the fashíonexpress image consistent across all locations.
During the past year 11 new stores were opened. The division is confident that this chain will continue to increase its turnover and profit contribution, and that it can easily expand to 150 stores.
donna-claire
The past year was one of disappointment for donna-claire, with total turnover declining by 4,8%.
This drop occurred despite the opening of seven new stores and following on the opening of 12 new stores in the previous year. These additional stores have resulted in a high rate of growth in the running costs of the chain and in the absence of rising turnover the result has been a significant decline in profits in this chain. Profit was further reduced by a higher volume of mark-downs.
A project to reposition the donna-claire brand started in the previous year and the vision underlying the new strategy has been communicated to all levels in the business to ensure there is complete acceptance and commitment to achieving the desired results.
The slogan “fashion to celebrate your curves” encapsulates the essence of the new donna-claire brand, with the goal of supplying consistent ranges of fashionable products that will appeal to all South African women with fuller figures. There is a strong emphasis on improving the fit of garments as well as implementing appropriate pricing policies. The objective is to ensure that donna-claire shops become and remain the preferred shopping destination of the fuller-figure customer.
Historically the donna-claire chain served a relatively small niche market of older customers with largely conservative tastes in fashion. With the repositioning, it is now imperative to appeal to a wider group of customers, including young adults, who can expect to find well-tailored garments in appropriate fashion styles. There will be a drive to grow market share and take the brand to a higher level of awareness and appeal.
The donna-claire chain also has a new store design which is in keeping with the new brand image and should prove attractive to customers in the target groups. Early in the next year a new shop window design will be introduced in the top 22 stores and this will reflect the new positioning of the brand.
Luella
Turnover in the Luella chain grew by 36,7% as compared with the previous year. The improvement was attributable to the arrival of more appealing ranges of products in the shops and also to a high level of mark-down sales which disposed of previous ranges. In spite of the additional mark-down, profitability for the year improved and with the expected gains in the next year this chain will make an improved contribution to the division’s profits in the future.
During the year two unprofitable stores were closed. One new store was opened in the Hemmingway Mall in East London. The chain had 17 stores at the year-end, all of which are in key shopping centres.
The division believes that there is further scope to improve the fashion level of the products supplied by the Luella chain and that, on this basis, it can improve its profitability in the future. It has the potential to be a 50-store chain.
Quarterly instead of half-yearly seasonality
Historically the division planned its operations on the basis of two half-yearly cycles within a year’s trading and stock acquisition followed that pattern. This had the disadvantage that it was difficult if not impossible to secure prompt repeat consignments of fast-selling stock and that predictions of trends in style and customer choices could easily prove to be misplaced since they were necessarily made long in advance. Hence business was lost because orders for new stock could not be placed at short notice.
Improvements made in the efficiency of the group’s supply chain coupled with a better understanding within the division of the manner in which fashion trends occur among customers have allowed a significant advance to be made in that it is now possible to operate on the basis of four quarterly stages in a year. Since October 2009 quarterly planning and buying have been implemented in the division, the impact of which should be felt during the next financial year. This allows a number of decisions to be made with greater precision, among them the separation of styling from fabric buying decisions, the placing of orders on a repeat and last-minute basis, and the control of stock levels. At the same time the division has brought the design function for its products in-house, with designers now reporting directly to the managers of the division. There is improved integration between the teams responsible for market research, product design, buying, manufacturing, sales and market feedback. This process will take time to unfold fully, but benefits are already being felt in speed to market, stock levels and in other respects.
Stock levels and mark-downs
Stock levels at the year-end were within an acceptable range and projected stock levels are considered to be appropriate.
The medium-term goal of the division remains to reduce clothing and footwear mark-downs to between 10% and 12% of sales, and to increase stock turn significantly.
Supporting indigenous design and supply
Foschini launched a new brand, “Love Movement by Stoned Cherrie” in November 2009. This launch was underpinned by Stoned Cherrie’s vision to become a global African-lifestyle brand in collaboration with a credible retail partner. Stoned Cherrie was established in 2000 by Nkhensani Nkosi, a well-known entrepreneur, TV personality and lauded actress, making her one of the new voices of Africa. The adoption of this brand represents visible commitment by the Foschini group to social development in Africa and support for indigenous design and supply.
“Love Movement” is currently in 49 Foschini stores. This innovative range, consisting of African-inspired products that simultaneously express old, new and futuristic elements, has proven to have a broad customer appeal. Based on the current level of success, opportunities exist to expand both the store base and the product offering.
STRATEGY AND PROSPECTS
There is general awareness that South African consumers are under pressure and that levels of disposable income have declined. Despite this, the Foschini division considers that it is well positioned in terms of the number and quality of existing and planned stores and its flexible buying processes to withstand a continuation in the current economic downturn. Its objective is to emerge strongly, in order to capitalise on the upswing which will follow.
The division’s continuing investment of capital in its programme of new store openings and the refurbishment of existing stores, even during a period of economic decline, is part of a long-term strategy to capitalise on South Africa’s proven pattern of economic growth despite periodic downturns in the business cycle.
In the next year the division will open more than 25 new stores and will upgrade approximately 15 CBD stores. These measures will add substantial turnover and improve the visibility of the division to the consumer.
The division is currently rolling out lighting efficiency initiatives across its stores as part of efforts by the group to reduce the environmental footprint and increase the energy efficiency of its stores.
In addition the division will open its first stores in Lusaka, Zambia, in November 2010.
Other significant venues for new stores in the next year are:
| I’Langa Mall | (Nelspruit) |
| Goldfields Mall | (Welkom) |
| Mamelodi Crossing | (Pretoria) |
| Chris Hani Centre | (Vosloorus) |
The division’s strength in the markets it serves and its growth over the years are reflected in the table below, setting out details of the numbers of stores in its four chains.
| Mark-down statistics | |||||
| 2006 | 2007 | 2008 | 2009 | 2010 | |
| Mark-down value (Rm) | 349,3 | 371,0 | 450,6 | 380,8 | 410,4 |
| % of sales | 15,1 | 15,1 | 17,4 | 15,0 | 15,2 |
| Store statistics | |||||||
| Projection | |||||||
| 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | |
| Foschini | 201 | 207 | 211 | 217 | 223 | 230 | 235 |
| fashíonexpress | 90 | 97 | 100 | 115 | 126 | 140 | 150 |
| donna-claire | 59 | 64 | 70 | 82 | 88 | 93 | 100 |
| Luella | 6 | 18 | 19 | 18 | 17 | 18 | 25 |
| Total No. of stores | 356 | 386 | 400 | 432 | 454 | 481 | 510 |
| Closures | 6 | 3 | 5 | 2 | 5 | 2 | 2 |
| Floor area (m2) | 163 703 | 178 206 | 191 787 | 210 659 | 222 554 | 235 000 | 245 000 |
