annual report 2009
Adrienne Kleinman
Jewellery Division
POSITIONING
The Foschini Group Jewellery division is the leading player in the mass middle market for jewellery and branded accessories. It has attained this position by offering attractive and inviting retail environments, extensive product ranges, desirable brands and outstanding service. Measured by number of stores, American Swiss Jewellers is the largest jewellery chain in southern Africa, followed by Sterns. American Swiss and Sterns have each traded successfully for more than 100 years and as a result have built up large and loyal followings in the marketplace. The AMPS survey of 2008 highlights that more than 40% of jewellery consumers bought jewellery from American Swiss or Sterns during the past year, and confirms American Swiss and Sterns as the number 1 and number 2 jewellery brands respectively in southern Africa. In-house credit accounts for 60% of total sales.
The division strives continually to differentiate the products it stocks in order to offer real choice to customers. Merchandise is obtained from all parts of the world, including products designed and manufactured locally for the southern African market, thus ensuring that there is ongoing innovation and trend-setting.
The American Swiss brand is positioned to appeal to the fashion-forward and image-conscious customer, and offers consumers in the growing middle market appropriate products and brands to express their status. The American Swiss brand is highly visible in shopping centres and in the media, making its fashion statements with confidence and flair.
Sterns is a contemporary and classic jeweller well-known to the market for its quality and welcoming service, offering beautiful and meaningful jewellery. The Sterns brand has now been repositioned so that all elements from advertising and store design through to offerings of merchandise, convey a consistent contemporary image.
Matrix, the division’s sunglasses and cell phones chain, caters for the brand-savvy and image-conscious consumer who aspires to designer labels.
| 2009 | % change | 2008 | ||
| Turnover (R million) | American Swiss | 675,3 | 1,8 | 663,4 |
| Matrix | 40,4 | 4,1 | 38,8 | |
| Sterns | 410,3 | 5,6 | 388,5 | |
| Total | 1 126,0 | 3,2 | 1 090,7 | |
| Number of stores | American Swiss | 199 | 6,4 | 187 |
| Matrix | 19 | – | 19 | |
| Sterns | 132 | 8,2 | 122 | |
| Total | 350 | 6,7 | 328 | |
| Floor area (gross m2) | American Swiss | 14 244 | 7,3 | 13 274 |
| Matrix | 594 | (5,0) | 625 | |
| Sterns | 9 154 | 6,2 | 8 620 | |
| Total | 23 992 | 6,5 | 22 519 | |
| Number of employees | American Swiss | 807 | 5,9 | 762 |
| Matrix | 56 | (5,1) | 59 | |
| Sterns | 508 | 9,7 | 463 | |
| Total | 1 371 | 6,8 | 1 284 |
REVIEW OF THE YEAR
The division’s sales grew by 3,2% for the year. While this is lower than the 6,7% growth achieved in the previous year, it is nevertheless an acceptable result if account is taken of the substantially higher gold price which prevailed for much of the year, higher interest rates, higher inflation, a severe down-turn in the economy and the global credit crisis. Despite these factors, the division kept expenses and markdowns at acceptable levels, ensuring positive profit growth for the year.
The percentage of markdowns to sales for the year was at 9,2%, largely in line with corresponding levels in past years.
| 2005 | 2006 | 2007 | 2008 | 2009 | |
| Markdown value (Rm) | 83,8 | 89,0 | 96,5 | 119,4 | 113,6 |
| % of sales | 10,1 | 9,1 | 8,6 | 8,8 | 9,2 |
The division’s merchants faced the challenge of contending with the increasing gold price as well as the other economic factors mentioned above. The Rand price of gold jumped by more than 40% during the year on top of last year’s growth of more than 30%, but innovative merchandising and access to the group’s positive cash flow allowed stock levels at the stores to be maintained at desirable levels. These strategies, together with a focus on marketing, allowed the division to achieve positive turnover growth for the year while positioning the brands well to take advantage of an upswing in the economy when it arrives.
Stock turn was maintained at last year’s average level of 1,7, which is an acceptable result if the factors mentioned above are taken into account.
The division opened 26 new stores in the year under review (American Swiss 12, Sterns 12, Matrix 2), compared to 19 in the previous year, and four under-performing stores were closed (Sterns 2, Matrix 2).
As is evident from the number of stores that were opened during the year, the division is confident about the future and about its prospects for continued expansion, although the new stores have put average trading densities under pressure for the next year. The division traded at an average density of R47 000 per square metre compared with R48 000 per square metre in the previous year.STRATeGy
The division expects that trading conditions in the new financial year will continue to be tough and it will continue to rely on the strength of each of the American Swiss, Sterns and Matrix brands.
As the market leader, American Swiss has identified the need to continuously evolve. This will be achieved by reviewing all elements of the brand, including communication, design and service. Each element will then be aligned to ensure that there is consistency in communications to staff members and customers.
As a result of this initiative, a new-format American Swiss concept store is already being tested.
Sterns launched a new concept store at the beginning of the 2009 year and while there are aspects that need to be refined, the results are pleasing and the refined format will serve as a model to be used in all new stores. Existing stores will receive corresponding treatment over a period.
The Jewellery division considers that customer service is a key differentiator. Accordingly, the division is continuing to improve the training programmes used in stores and at the group’s head office in order to ensure that all staff members are aligned with the brand’s customer focus and its core values.
Supply chain management is a key focus within the group and the division has launched several initiatives that will, over the next few years, build a supplier pipeline that has greater flexibility and shorter lead times than have prevailed in the past. This should result in improved decision-making and operational efficiency.
The division’s store location strategy includes the continuous monitoring of performance trends, and where economic factors so dictate, closures or consolidation will proceed. Locations in new and existing shopping centres where the division’s stores are under-represented have been identified, and new stores will be opened in prime positions. Great care is taken in ensuring that new stores are appropriately sized. A measured view of expansion is taken, in line with the core strategy of seeking long-term growth in sales and profit. Several good sites for Matrix have been identified in major shopping centres that will allow for growth over the next years.
PROSPECTS
As was indicated above, the division expects the next year to be tough, but it is confident that the strength of the brands, the positive cash flow of the group and the expertise of staff members will ensure that the division is able to trade through the downturn and emerge strongly.
| Store statistics | Projection | ||||||
| 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | |
| American Swiss | 175 | 179 | 181 | 187 | 199 | 205 | 209 |
| Sterns | 115 | 115 | 121 | 122 | 132 | 140 | 148 |
| Matrix | 12 | 14 | 14 | 19 | 19 | 21 | 22 |
| Total no. of stores | 302 | 308 | 316 | 328 | 350 | 366 | 379 |
| Closures | 6 | 3 | 4 | 7 | 4 | 3 | 3 |
| Floor area (m2) | 21 189 | 21 580 | 22 029 | 22 519 | 23 992 | 24 967 | 25 712 |
