annual report 2009
Suzanne Annenberg
exact!
POSITIONING
The exact! division provides stylish and economical clothing, footwear and accessories for modern South African families in the LSM 5 – 8 categories, with categories 5 – 7 being the core target market. The division sets out to provide carefully selected ranges with particular appeal to women and men aged 30 and upwards, as well as clothing and footwear for children aged between three and 12 years.
Cell phones and accessories complete the product range.
The concept of value for money remains a cornerstone of the division.
The division’s stores are located in shopping malls, high streets and rural areas, and customers are offered a consistent shopping experience wherever they choose to shop.
| % of | ||
| Store location | turnover | % of m² |
| Shopping malls | 45,4 | 46,7 |
| High streets | 29,2 | 25,0 |
| Rural areas | 25,4 | 28,3 |
A breakdown of sales by product category in the exact! stores in the 2009 year is set out in the following table.
| Womenswear | 25% |
| Menswear | 20% |
| Footwear (for men, women and children) | 20% |
| Childrenswear | 11% |
| Accessories | 3% |
| Smalls | 3% |
| Cellular | 18% |
| 2009 | % change | 2008 | |
| Turnover (R million) | 743,5 | 5,1 | 707,2 |
| Number of stores | 198 | 8,8 | 182 |
| Floor area (gross m2) | 58 789 | 11,3 | 52 831 |
| Number of employees | 1 030 | (3,1) | 1 063 |
REVIEW OF THE YEAR
As was foreseen last year, the retail sector continued to experience tough trading conditions during the 2009 financial year. Revenue at the exact! stores was negatively impacted by several interest rate hikes, while high inflation in food and transport also had a dampening effect on spending. There is evidence that adult shoppers cut back on their own shopping, deferring instead to that of their children.
The Christmas period provided the revenue highlight of the year and surpassed expectations across all categories of the business. However, this was insufficient to counteract a subdued performance during the rest of the year. The result was that turnover for the year grew by 5,1% with same store sales up by 1,9%.
A research project undertaken last year showed that consumers’ tastes in womenswear were moving towards more fashionable products. This prompted the division to introduce a revised product range which arrived in the second half of the year. The initial results were promising and customers expressed satisfaction with the new range, but problems in the supply line hindered a full exploitation of its potential, with the result that overall performance was not as strong as had been hoped.
The footwear division performed reasonably well.
Boyswear boasted another year of outstanding performance, growing sales by more than 21% off an extremely strong base. This illustrates that a significant opportunity exists for expanding this area into girlswear.
The performance in childrenswear is attributed to offering differentiated ranges and the fact that, despite tough economic times, consumers continue to invest in their children’s clothing.
The performance in menswear was below expectation and strategies are being implemented to reverse this trend.
exact! continued to support local clothing manufacturing through a strong collaborative effort between its buying teams and the group’s in-house design and manufacturing arm, TFGA.
The devaluation of the Rand, together with high inflation in China and changes in the product mix, resulted in overall product inflation of 14,9%.
Stock levels were kept in line with demand, and markdown percentages showed a slight improvement on the previous year.
| 2005 | 2006 | 2007 | 2008 | 2009 | |
| Markdown value (Rm) | 66,2 | 84,6 | 91,0 | 104,3 | 105,3 |
| % of sales | 13,7 | 14,6 | 14,3 | 15,8 | 15,2 |
Cell phone sales increased by 8,3%, underscoring the strong demand which continues to exist for this product category in the exact! target market, notwithstanding supply issues in the second half of the year. Cell phone products made up 18,3% of divisional turnover.
The volume of sales in shopping malls and high streets relative to rural areas remained at the same level as in the past year.
During the course of the year, the division opened 16 new stores, relocated six and enlarged two.
The division retains its goal of improving the supply chain of products into its stores, in line with the group’s overall initiative in this regard, and top priority was given to projects initiated last year to optimise lead times and improve stock turn. Some progress has been made and more is expected during the next year.
The division’s personnel development activities continued to focus on training programmes for store managers and middle management. In addition, store staff benefitted from ‘early morning training’ modules which proved to be particularly successful for imparting and sharing information.
Workshops were held to interpret and transmit the exact! values, which are a species of the Foschini Group Values discussed in the report of the Human Resources division, using a discussion forum known as ‘world café conversations’. Steps to implement these values in everyday operations were then taken through a collaborative effort between the human resource, operations and marketing departments.
Performance measurement, succession planning and talent retention are now firmly embedded in the culture of the exact! division.
A corporate social responsibility project launched in conjunction with the Gauteng Department of Education for learners in Grades 11 and 12 proved successful, and exact! continued its support of the Attie van Wyk School.
STRATEGY
exact!’s strategy rests on the six pillars of its business, being people, fashion, value, stores, service and profit. Over a number of years these concepts have become entrenched and been reinforced in the division’s thinking and planning. For the year ahead, an action plan and success criteria built upon them have been developed in order to drive turnover.
In terms of fashion and value, strategies have been designed to ensure a consistent and smooth implementation of the goal of keeping the stores stocked at all times with optimally selected and stylish ‘fashion solutions’ (combinations of clothing, footwear and accessories) selling at moderate prices. The objective is to enable customers to appreciate these qualities when seeking easy-to-combine and comfortable apparel, and so make exact! the preferred destination for the target market.
In support of local initiatives the division aims in the next year to increase its local procurement of apparel.
To ensure that suitable employees are recruited and are enabled to expand their careers while rendering good service to the group, exact! will continue to implement a series of processes which have by now proven their utility. They involve:
- dialogue over various issues affecting the division and, more broadly, the group;
- implementing steps to recognise and up-skill talented individuals;
- conducting constructive performance development discussions at regular intervals; and
- systematically ensuring that training and development needs are met.
It remains an objective to provide rewarding careers to people from previously disadvantaged communities while ensuring that the supply of talent and skills matches business requirements.
Particularly in difficult economic times, it is vital that scarce resources are used as effectively as possible. To this end, exact! will in the next year examine every aspect of the business in order to ensure that financial resources, people, systems and processes are deployed to best effect in order to generate acceptable profits.
Service to shoppers is seen as paramount, and with this in mind particular emphasis will be placed on training store managers, who play a key role in the relationship between exact! and its customers.
Further progress with the group’s initiatives to increase speed-to-market and improve supply chain flexibility should allow exact! to provide more of the right merchandise where and when it is most needed, with the ultimate goal of maximising customer service.
exact! intends to open in excess of eight new stores and enlarge or relocate five stores, focusing on sites where mass shopping takes place. To increase brand awareness, shop window branding and in-store branding will continue to be developed.
While the difficult economic conditions prevailing at the start of the new financial year are acknowledged, emphasis will once again be placed on steps to boost turnover, balanced by a disciplined approach to stock control.
The division’s current corporate responsibility initiatives will again be supported in the next year.
PROSPECTS
Difficult retail conditions are expected to prevail during the first part of the next year but there is an expectation of an upturn towards the end of the year.
With this in mind, the exact! division has aligned its budgets with expected consumer spending patterns and is positioning itself to take advantage of the upturn as soon as it occurs. Relentless attention to customers’ needs will be its first operational goal in striving to meet these budgets.
The concept of well-matched ‘fashion solutions’ designed to appeal to customers aged 30 and upwards, plus their children, remains an excellent exploitable opportunity for the exact! division.
| Store statistics | Projection | ||||||
| 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | |
| No. of stores | 170 | 170 | 180 | 182 | 198 | 203 | 209 |
| Closures | 4 | – | 1 | 1 | – | 3 | 1 |
| Floor area (m2) | 46 862 | 47 855 | 51 386 | 52 831 | 58 789 | 60 256 | 62 056 |
