Fashion retailer The Foschini Group (TFG) is aggressively building a defensive business, launching a slew of fashion lines and rolling out stores beyond the South African market.
After acquiring an 85% stake in UK ladies fashion group Phase Eight in January, TFG is in the process of bedding down the retailer, as it looks to build scale within the group.
Phase Eight, which has 107 standalone stores and 203 outlets in department stores such as John Lewis, Debenhams and House of Fraser in the region, is looking at store openings internationally.
TFG will grow Phase Eight’s store footprint in Italy, America, China and Mexico adding to the retailer’s 331 stores in 16 countries including Sweden, Hong Kong, Singapore, United Arab Emirates, Germany, Australia, Malaysia and more.
TFG CEO Doug Murray says the group will look at markets around the world instead of targeting one jurisdiction for Phase Eight’s fortunes.
Despite the influx of foreign retail brands in recent years such as Topshop, Zara, Forever 21, River Island and soon Hennes & Mauritz (H&M) looking to set up shop, Phase Eight is not bullish on the South African market.
“We didn’t buy Phase Eight with a view of bringing it to South Africa. We will look at the possibility of bringing a couple of stores into South Africa, more for people to understand the brand than to have significant store roll out potential,” Murray says.
This, he says, is because Phase Eight is a niche brand targeting consumers in the upper end of the market and to export clothing from the UK to South Africa will be expensive.
The acquisition of Phase Eight will also boost TFG’s earnings. The company’s financial director Anthony Thunstrom says it has taken a conservative view on the annual retail sales it is factoring in from the Phase Eight acquisition of “between 12% to 14% of turnover”. This translates to a contribution of about R2 billion to R3 billion to TFG’s annual retail sales of over R14 billion.
TFG, which operates retailers such as Total Sports, @home Living Space, Markham, American Swiss, Sterns and more, says its brands are building a defensive business with a diverse product categories focusing from the lower to upper consumers.
As part of its diversification, TFG will look at heavily investing in the children’s wear market through acquisitions and start-up companies. The company is starting a new brand Soda Block – signalling its significant venture in the children’s wear segment.
“We are not heavily invested in the children’s market. We have exposure to this market through Foschini and Exact, but Soda Block will make us more involved in children’s wear category,” Murray says.
TFG is planning for Soda Block to have about 11 stores before December and up to 13 stores before the end of March.
Murray adds that the company will announce further deals in this segment, as the younger population in South Africa becomes more fashion conscious. As Murray puts it: “The market [children’s wear] has always been there. It has always been strong.”
Thunstrom says the group is being approached once a week in terms of acquisition opportunities in the children’s wear segment. “We have strong infrastructure, merchandising and information technology systems that would enable us to add other brands. If we find the right acquisitions or start-ups, it’s about what is attractive to the group,” he says.
TFG’s competitor Truworths has been active in the segment and over past year it acquired children’s wear brand Naartjie and Earthchild Clothing.
Another diversification play for the group is its exposure to the African continent. It currently has about 160 stores in Kenya, Ghana, Zambia, Botswana and Swaziland, and the next stop is growing its African stores to 375 by 2020.
“This depends on the availability of sites. The growth of stores in the region is stronger than in South Africa, but it is not something we see as a big driver for the group in the next five years. It’s a long-term story,” Murray says.
Culled from Money Web.
Tags: Doug Murray, south african fashion, The Foschini Group