Steinhoff and Shoprite call off deal

Steinhoff and Shoprite call off deal

This Reuters report by Tiisetso Motsoeneng and TJ Strydom

Steinhoff and Shoprite in February called off a deal to create an African shopping giant, preventing leading investor Christo Wiese from bringing more of his retail assets under one roof.

Christo Wiese (Photo by Hetty Zantman/Financial Mail/Gallo Images/Getty Images)

Billionaire Wiese, a shareholder in both companies and the architect of the deal, and other investors including state-owned pension fund the Public Investment Corporation (PIC) could not agree on the value of a share exchange.

The collapse of the deal will test Wiese’s determination to place more and more of his assets in one basket. It is a major victory for at least three of Shoprite’s minority shareholders who told Reuters that the commercial and strategic logic did not stand up to scrutiny.

The combination was estimated to have a value of more than R180 billion.

In a joint statement, the two firms said “the fact that the relevant parties could not reach an agreement in respect of the share exchange resulted in the negotiations being terminated.”

Complaints by Shoprite minorities – that the deal was sparse on details, lacked obvious cost-savings overlaps and would mean exchanging a stock with bigger potential for what they called inferior businesses – had depressed both companies’ share prices.

“There were no real synergies between the two,” said 36One Asset Management fund manager Evan Walker.

“We own shares in both, (and) kept shares in both hoping the deal would fail and sanity would prevail.”

Shares in Shoprite traded 7.5 percent higher at 1435 GMT. Steinhoff jumped 5 percent in Frankfurt and 4.8 percent in Johannesburg, where it has a secondary listing.

AFRICA’S IKEA

Under the deal, Steinhoff would have sold its African assets to Shoprite in return for a controlling stake in the $8 billion grocery chain. Steinhoff would have exchanged its shares for those of Shoprite’s top two shareholders — Wiese and the PIC, which like Wiese owns shares in both companies.

The deal would have given Steinhoff, dubbed Africa’s IKEA and which vies with the Swedish firm for global market share, a major interest in Shoprite, a 110 billion rand company operating in countries including Ghana, Nigeria and Angola.

It would have also ensured Wiese, who owns 16 percent of Shoprite, moved more of his assets into Steinhoff, in which he owns a 23 percent stake bulked up in 2014 through the cash and share sale of his Pepkor chain to the furniture retailer.

For Shoprite the termination of the deal allows it to focus its attention on growing its store network elsewhere on the continent.

It could also reassure Steinhoff’s shareholders who might have had concerns about a major deviation from its stated strategy of selling low-cost furniture and household goods.

“In my view, the deal was not crucial to either Shoprite or Steinhoff and it’s failing should not detract from the investment case of either company,” said Unathi Loos, an analyst at Investec Asset Management.

Steinhoff also owns retailers Poundland in Britain and Conforama in France.

However, the collapse of the tie-up might not deter Steinhoff from buying control of Shoprite if food retail is the cornerstone of its new strategy because the company could buy out a controlling stake from Wiese, who told Reuters last year he was looking for ways to consolidate his assets.

“It’s not the first time Wiese has tried to take out Shoprite. I don’t think will be the last,”

(Reporting by Nqobile Dludla; Writing by James Macharia and Tiisetso Motsoeneng; Editing by Keith Weir)

SA’s malls set to enjoy fair trade this festive season… and a bright future

SA’s malls set to enjoy fair trade this festive season… and a bright future

This holiday season is likely to ring in fair festive retail sales despite 2016’s frail and fickle economy. In fact, this December’s retail trade could well be an improvement on last year.

Paul Gerard

This is the word from Paul Gerard of Flanagan & Gerard Property Development & Investment, the leading shopping centre developer and retail leasing specialists.

Even with the current political volatility, macroeconomic indicators favour the festive trading season in 2016,” says Gerard.

His careful optimism is driven by the performance of retailers in Flanagan & Gerard’s shopping centre portfolio, which show better growth than figures published for the industry.

Established in 2001, Flanagan and Gerard has been involved in developing many dominant regional shopping centres and high-end niche community centres across South Africa, working with various joint-venture partners. Noted retail developments under its belt include Vaal Mall, Paarl Mall, Mall of the North, Middelburg Mall, Highveld Mall, Heidelberg Mall, Eyethu Orange Farm Mall, Morningside Shopping Centre and Nicolway Bryanston, among others.

It also has an impressive trio of exciting new retail property developments set to open shortly.

The world-class Springs Mall at Blue Crane Eco Park in Ekurhuleni, on Gauteng’s East Rand, opens on 16 March 2017. At 48 000 mit will be the only major mall in its region. It is a joint venture between Flanagan & Gerard, Blue Crane Eco Mall (Pty) Ltd, JSE-listed retail focused SA REIT Vukile Property Fund and Murinda Investments, which is part of the Giuricich Bros Group.

The spectacular 80 000 m2 Ballito Junction Regional Mall redevelopment on KwaZulu-Natal’s Dolphin Coast will open on 23 March 2017 with 200-plus shops. It is owned and developed by Flanagan & Gerard with Menlyn Maine Investment Holdings.

The highly anticipated 50,000sqm regional Thavhani Mall at Thavhani City in Thohoyandou, Limpopo, opens on 24 August 2017. Flanagan & Gerard is developer and shareholder in Thavhani Property Investments, responsible for the leasing and development of the mall. Vukile Property Fund has also secured a one-third stake in this mall, which will transfer on its completion.

Gerard notes that 2016 has given consumers plenty of new retail space, especially in the Gauteng region, and boosted their choices with new international brands.

This festive season, he believes people will spend mostly on first-order goods, such as food, pharmaceuticals, services and clothing. In contrast, furniture and other discretionary purchases are likely to be least appealing to shoppers.

Dominant regional shopping centres are best poised to attract spend,” reports Gerard who cautions that, even so, trading success relies strongly on a shopping centre’s relevance.

Shopping centres that successfully compete for market share are those deeply rooted in their communities. They offer a mix of shopping, services and leisure that accurately reflect the community or region they serve. They also take part in more community involvement,” says Gerard.

Adding the seasonal bells and whistles to a festive shopping experience can also help support good holiday trade. Gerard says: “Décor itself plays a small part in driving festive trade. People are generally aspirational and favour shopping environments that are more elegant and engaging. Depending on the community in which a mall is located, entertainment can contribute to promoting festive spend.”

As for online shopping, he notes that it still plays a very small role, and only in higher-income areas within metropolitans, so it won’t have a significant impact on bricks-and-mortar retail this summer.

Beyond the festive season, Gerard’s outlook for retail property in 2017 is positive as the shopping centre industry continues to advance.

As the information revolution continues, the shopping centre mix evolves. Service-based retail will continue to become more prominent. In addition, multichannel and omnichannel retailing will become more prevalent. Retailers will offer all forms of shopping and do so in a more integrated way. For example, offering online shopping with click-and-collect options from bricks-and-mortar stores.”

Black Friday: The key to retail success is ensuring a positive shopper experience across all relevant channels

Taj Elkhayat

Black Friday: The key to retail success is ensuring a positive shopper experience across all relevant channels

By Taj Elkhayat, Regional Vice President Middle East, Turkey and Africa for Riverbed Technology

In the build up to this year’s November 25 Black Friday – and the lesser known Cyber Monday – experts predicted that shoppers would spend double the amount they did in 2015. And they were right! In some instances (see news reports below) this year’s retail shopping bonanza exceeded 300 percent.

At the same time PwC forecast that online sales would account for 77 percent of spending, versus 17 percent in stores, meaning that competition for stores to attract and retain as many shoppers as possible will be all the more fierce.

However, in order to stand out, as customers’ expectations for optimal service continue to grow, it’s no longer enough to simply offer the best prices. The key to retail success is ensuring a positive shopper experience across all relevant channels.

For traditional brick and mortar stores, this means ensuring having the latest pricing database, staff have the latest training, and customers have the latest messaging about special offers. It also translates into being agile and flexible – for example, being able to react to local demand by quickly setting up fully outfitted “pop-up” stores just for the duration of the sale period.

Most important, it’s about guaranteeing shops remain open for business and are able to serve customers even if the network to the head-office or the Internet is down. In the cloud, staying ahead is about scaling up resources in order to support an increased demand from online shoppers, and being able to quickly update applications in order to correct problems, or add new features so that customers and retail staff receive those updates automatically, wherever they are.

This is why most retailers have turned to cloud technologies in order to improve employee productivity, increase time and cost savings and improve customer satisfaction. Today’s businesses are storing information in the cloud as well as on local systems – creating what are known as hybrid environments – with 93 percent of retailers using cloud-based enterprise apps at work today.

Just about every business operation is enabled and mediated by applications, so it is easy to see why 96 percent of retailers believe app performance plays such a relevant role in productivity. However, business applications do not always perform optimally. 62 percent of retailers say the poor performance of enterprise applications has negatively impacted their work on a weekly or more frequent basis. This can lead to retailers’ failure to meet customers’ demands for a reliable, time-effective experience. Slow apps present retailers with a number of pitfalls which can have serious repercussions for a company’s bottom line, including dissatisfied customers (36 percent), contract delays (35 percent), critical deadlines missed (35 per cent), and loss of clients or customers (29 percent).

The risk of application performance failure is particularly high with flash and anticipated online sales such as Black Friday and Cyber Monday, where retailers have been unprepared for the spike in website traffic from the increased volumes of shoppers visiting their sites. If a store doesn’t have the monitoring and diagnostics systems in place to detect where network issues lie, it can take much longer to resolve and have the website back online as normal, frustrating customers and employees alike.

To deliver superior application performance in today’s hybrid environments, retailers should consider using technology that provides end-to-end application visibility, optimisation and control, allowing them to quickly – and remotely – detect, analyse, and fix any network and application performance problems before they impact business revenue and customer experience.

In times where online shopping is the norm, companies cannot afford to lose customers over poor application performance. Only by optimising and monitoring the end-to-end performance of their applications and websites can retailers deliver the seamless service that shoppers expect – and ensure they make the most of the upward trend in sales.

Takealot’s website crashes on Black Friday

In a TMG Digital report by Roxanne Henderson, the newsline states that although the Takealot online shopping website went down in the Black Friday frenzy it still predicts its current sale will be the most successful in its history.

According to Henderson, although Takealot had planned for five times the usual traffic the site still experienced checkout problems as the payment gateway was affected by nationwide Black Friday pressure and slowing down checkouts.

In her report, Henderson notes that IT company Snapt says that site crashes such as Takealot’s‚ caused by high traffic volumes‚ can be avoided with proper IT infrastructure.

Takealot however, remains upbeat, as web traffic continued to grow throughout the day. Exceeding 300 percent of the usual traffic expected on a Friday in the festive season.

Resilient TFG reports 16.9 percent retail turnover growth

Resilient TFG reports 16.9 percent retail turnover growth

The TFG Group, now operating in 34 countries, has announced robust turnover growth of 16.9 percent to R11,4 billion, for the six months to end-September 2016. Turnover from TFG Africa (all its African operations) grew by 9.5 percent, with comparable sales growth of 2,1 percent.

The impressive results were achieved despite a subdued economic climate and difficult trading environment, which has led to a decline in earnings for most retailers.

Doug Murray

CEO Doug Murray attributed the impressive results to diversification, international expansion, supply chain optimisation, operating cost controls, capital allocation discipline and attracting cash customers.

The Group now has 22 brands, spanning a variety of age and income groups. Over 3 220 outlets stock clothing, jewellery, accessories, sporting apparel and equipment, homeware and cellular goods and services.

Headline earnings per share increased by 5,7 percent to 496,8 cents per share, up from 470,2 cents per share in the previous period. An interim cash dividend of 320,0 cents per share has been declared, a 4,6 percent increase.

The total cash component of turnover was 61,4 percent (TFG Africa: 50,2 percent). Group cash turnover growth was strong at 29,5 percent (TFG Africa: 19 percent). Credit turnover, however, grew by only 1,4 percent due to the affordability assessment regulations, specifically proof of income requirements, that have reduced the number of new accounts.

Gross margin remained broadly consistent in all merchandise categories. The Group achieved a gross margin of 49,6 percent (September 2015: 49,1 percent).

Total trading expenses increased by 19,0 percent over the previous period, largely due to the acquisition of Whistles, a leading contemporary fashion brand for men and women. Trading expenses in TFG Africa were well contained and increased by only 9,7 percent. CEO Doug Murray said Whistles had already generated a positive EBITDA profit (earnings before interest, tax, depreciation and amortisation) due to the strategies implemented since acquisition.

The international division performed well, with earnings growth of 48 percent in GBP for the period. Phase Eight, offering high quality fashion to women aged 35-55 years, had 11,6 percent turnover growth in GBP.

Capital optimisation

As part of a capital optimisation programme, 33 Group stores were closed during the reporting period and another 129 outlets were opened: 46 internationally, 74 in South Africa and nine in the rest of Africa. This includes the first TFG store in Kenya – Sterns – in Nairobi’s The Junction mall.

Trading space in African operations increased by 5,3 percent during the reporting period.

The Group plans to open more than 100 new outlets in the second half of the year: 90 in Africa, and the balance internationally.

Expanding our footprint in the rest of Africa remains a Group objective in line with our growth strategy.”

Online and merchandise turnover growth

TFG’s e-commerce offering increased with the addition of Foschini cosmetics, Markham and Fabiani to the seven brands already online. “Turnover from our online trading continues to grow above expectation for both our local and international brands,” said Murray.

Group turnover growth in the cellphone category was 20,3 percent, closely followed by clothing at19,6 percent. Homeware turnover growth was 7,3 percent, jewellery 4 percent and cosmetics 3 percent. Total same store turnover (TFG Africa) grew by 2,1 percent. Production inflation averaged 9 percent.

Credit turnover

The retail debtors’ book of R6,7 billion had no growth, compared to March 2016. This was due to the impact of the affordability regulations on credit turnover and the number of active accounts. Murray estimated the negative impact on credit turnover to be in the region of R310 million for this period.

Commitment to strategic objectives

Despite the uncertain outlook for the domestic and global economy, Murray said that continued commitment to strategic objectives around growth, profit, customers and leadership development would support efforts to achieve a reasonable result for the full year.

Cost control is a key focus area, but we are continuing our investment in future growth.”

Initiatives planned for the second half of the year include working capital management and capital optimisation projects.

Concerned about the continued acceleration in crime-related losses in South Africa, TFG has already invested in various forensic capabilities to manage this risk. It has also started to roll out a revised and enhanced security strategy.

As always, festive season trading will largely determine performance for the full year.

As a listed company that currently employs over 20 000 people, Murray said that TFG is strongly supportive of the recently announced “CEO Initiative Pledge”. The Pledge stands against corruption and policy uncertainty which are having a negative impact on the South African economy.

Mall Indaba a huge success

Mall Indaba a huge success

Anthony Stokes, Centre Manager at St Georges Mall - JHI Properties, addresses delegates at Mall Indaba 2016

Anthony Stokes, Centre Manager at St Georges Mall – JHI Properties, addresses delegates at Mall Indaba 2016

The inaugural Mall Indaba held in Sandton recently was well received by delegates and the shopping centre industry as a whole.

Organised by CADEK Media, the two-day conference addressed all aspects of mall management, operations and marketing and was well attended by mall managers, owners, marketers and suppliers to the mall and retail industries.

Fourteen speakers addressed the conference on a wide variety of topics including the latest shopping centre trends, threats and opportunities.

Belinda Clur, Managing Director of Clur Research International opened the conference with an insightful overview on the Impact of the Economy as well as current Shopping Centre and Retail Trends. She said that conflicting and contrasting economic and retail trends now emerging require careful crafting from the shopping centre perspective.

The retail sector has shown considerable stamina amidst the broader economic slowdown over the last year. The Clur Retail Risk Indicator, part of Retail Live, an interpretive early warning system for shopping centres, showed a reduction in shopping centre risk over 2015 as mall space worked harder, driven by better use of space and most notably the impact of strategic tenant mix, sizing and product mix to correct under-performing space dynamics. Thus shopping centre managers and retailers are adapting to fast changing consumer dynamics.

Dirk Nico Prinsloo from Urban Studies added that with slower economic growth expected in South Africa over the next two to three years it is expected that a number of new retail developments planned will only enter the market in 2019 or later. Redevelopment opportunities will however gain momentum especially in established residential markets. Detailed market research will be critical for future retail developments especially with regards to the positioning of the new facilities.

The message from speakers at the Indaba was crystal clear: Malls need to be innovative in their approach to the management and marketing of their centres in order to ensure good foot traffic and to stay competitive.

Mall Indaba speakers: Back row, from left: Anthony Stokes, Justin Cohen, Dirk Nico Prinsloo, Chris De Klerk (Organiser). Front, from left: Belinda Clur, Francois Coetzer, Adrian Morris, Jasper De Vreugt

Mall Indaba speakers: Back row, from left: Anthony Stokes, Justin Cohen, Dirk Nico Prinsloo, Chris De Klerk (Organiser). Front, from left: Belinda Clur, Francois Coetzer, Adrian Morris, Jasper De Vreugt

Adrian Morris, COO of Design Partnership, said that Malls need to start transacting in culture, experiences and relationships. They need to become the hub for citizens, communities and tribes alike through re-imagining themselves as marketplaces for relationships, by offering complementary services and experiences that go well beyond products.

While utility and relevance form a solid foundation, malls must strive to deliver more, to truly capture the hearts and minds of today’s shopper. By tapping into an ecosystem of partners and citizens, they can create a powerful halo effect, generating value for all who participate.

Mall Indaba aims to be the annual meeting place where shopping centre management teams can gather to learn about the latest trends and opportunities in their industry. The conference also includes discussions on industry threats and challenges and sparks new ideas for shopping centres. A must attend event for the industry.

The next Mall Indaba will be held on 13 & 14 March 2017 at the Maslow Hotel in Sandton.

RICS - TCChetty

Africa’s built environment under the spotlight at the RICS Africa Summit 2016

RICS - TCChetty

RICS – TCChetty

The Royal Institution of Chartered Surveyors (RICS) will host its second annual RICS Africa Summit in Sandton Central, Johannesburg, on 24 February 2016, bringing together leading speakers and professionals in the built environment.

Opportunities and challenges in the real estate sector and broader built environment of the burgeoning Sub-Saharan Africa market will top the agenda at the RICS Africa Summit 2016, set to take place at the Hilton Hotel in Sandton Central – Africa’s richest square mile.

“We are excited to be hosting the RICS Africa Summit again in Sandton, following the success of our inaugural Africa conference last year. The event, which takes the form of a power-packed one-day conference, preceded by a gala dinner the night before, is already fully booked,” says TC Chetty, RICS country manager for South Africa.

RICS is a global professional body that promotes and enforces the highest qualifications and standards in the areas of land, real estate, construction and infrastructure. As a public benefit organisation, it operates in all the world’s major financial hubs in delivering international standards and policy influence.

World Bank research predicts that Sub-Saharan Africa’s GDP is set to grow from 4.2% in 2015 to 4.6% in 2016, and then rise to 5.0% in 2017. This points to the region out-performing many traditional markets and starting to match figures associated with India and China, as many countries in Sub-Saharan Africa hit 6-8% percent growth.

Comments Chetty: “Sub-Saharan Africa has seen unprecedented growth over the last decade, becoming one of the fastest growing regions in the world. While current global financial conditions may put a dampener on this growth, Sub-Saharan Africa’s emergence as the world’s next big consumer market will remain a huge positive force. The interest shown in the RICS Africa Summit 2016 is no surprise. We are set for some robust discussions around the challenges facing Sub-Saharan Africa, and importantly what can be done to overcome the challenges to ensure that opportunities are maximised.”

This year’s RICS Africa Summit keynote opening session by Stanlib’s Emerging Markets Economist Kganya Kgare – dubbed “Real estate outlook and sustainable investment” – will set the tone for conference deliberations. Kgare will speak about investment flows and economic factors that the property sector in the region will need to consider. He will look at Sub Saharan Africa’s current economic performance and sustaining desired growth, as well as zone in on where investment is coming from and where is it going.

Kgare will then join the first panel discussion of the Summit, which addresses strategies required for long term, sustainable investment in Sub Saharan Africa’s real estate market. The panel includes Neville Mandimika, Africa Analyst for Global Markets Research at Rand Merchant Bank and Anthony Lewis, Director for Sub-Saharan Africa Capital Markets at Jones Lang LaSalle.

Another highlight speaker is Ada Mwangola, Acting Director of Social and Political Pillars for Kenya Vision 2030, who will speak on industry best practice and integrating standards and professionalism. Mwangola will then join a panel debate on understanding the current market and those that stand to secure business opportunities. Other panelists will include Mark Walley, RICS’ Regional Managing Director, EMEA; Francois Viruly, Associate Professor at the University of Cape Town’s Department of Construction Economics and Management; and, Gasant Jacobs, Head of Business Development for Sub-Sahara Africa at Thomson Reuters.

The RICS Africa Summit 2016 will also have an interactive mini breakaway session for discussions around Sub Saharan solutions on land, property and the broader built environment. Other noteworthy speakers at the conference include Ruth Adams, Head of the Marine and Astronomical Team at the United Kingdom Hydrographic Office, who is a member of the RICS Global Land and Resources Strategy Board; Nnema Byrd, Investment Principal of Stanlib’s Africa Direct Property Development Fund; Peter Newmarch, President of the South African Geomatics Institute; and, Chris Williams-Wyn, Eastern Cape Surveyor-General of the Department of Rural Development and Land Reform.

RICS Chief Executive Officer, Sean Tompkins, will also be joining deliberations at the Summit, together with Wafula Nabutola, RICS’ Director for Sub Saharan Africa, and several members of RICS’ global leadership. Gugulethu Cele, a seasoned financial broadcaster and anchor at CNBC Africa will chair proceedings at the Summit.

Chetty concludes: “The RICS Africa Summit is establishing itself as a key annual event on Sub Saharan Africa’s business calendar. With the calibre of speakers and attendees at this year’s Summit, it is certainly going to be insightful and put another spotlight on the growth story of this major region of Africa, as well as its future prosperity.”

New Generation Stores

Retail2The Rosmead store opening in Kenilworth is part of Pick n Pay’s Next Generation project to develop a new benchmark of supermarkets offering an improved shopping experience for customers, a more efficient store for staff and a better return for stakeholders. Open spaces,  “Hero” departments with more products in innovative packaging, and a stronger focus on fresh products will make shopping at these new stores even more convenient and enjoyable.

“An incredible amount of work has gone into these stores, taking the best of what Pick n Pay has developed and innovated over the past year. Their performance to date has been exceptional and we’re delighted at the feedback from our customers. These stores are definitely a game-changer,” said Adrian Naude, Pick n Pay’s Marketing Director.

Other Next Generation stores include Glengarry in Durbanville, Benmore in Gauteng and the new store in Blue Hills, Midrand.

“Our customers love the Fresh offering and the space,” said Adrian Naude, Pick n Pay’s Marketing Director “They have responded extremely well to the new layout, the easy navigation, the innovation in products and packaging and the feel of the store.”

The new Fresh Hall is the welcome card of the Next Generation store, while the dedicated destination areas help to show off Pick n Pay’s full range of offerings. “We’ve upped our Fresh offering with more products and faster replenishment, so that our customers get the freshest of fresh offerings, whether at the start of a busy day or on their way home.”

Offerings at Rosmead include the butchery, deli, fish and sushi section, cheese, wine, and coffee. Pick n Pay has also updated the packaging of the popular and trusted Private Label products with fresh, new labels and added more lines to its product list across all departments.

“Our Private Label brands No Name, PnP label  and Finest are looking great and customers can look forward to picking up a wide range of value-for-money, convenient and well-priced goods.  Look out for our new range of PnP Italian meals, including pizza, lasagnes, and pasta bakes that taste amazing and offer great value for money.”

retail1The product ranges have also been handpicked to match the needs of the community shopping at the Rosmead store, with many insights coming from Smart Shopper data on shopping trends in the area. Pick n Pay understands that its customers are busy, so the convenience range has been placed near the store entrance to make it even easier for busy customers to do a quick shop.

The brightly coloured stores have clear signage to help customers navigate the aisles more effectively. The till area has been updated to give customers a quicker checkout and cashiers a more efficient working space.

Improved technology in-store makes it easier to keep an eye on stock levels so that customers won’t have to wait for their favourite products to be replenished.

“In-store surveys have revealed that customers find the Next Generation stores far easier to shop, much neater and tidier, more spacious and they’ve noticed the improved service from our staff,” said Naude.