annual report 2009
Donald Gedye
Sports Division
POSITIONING
The Sports division, comprising the Totalsports, sportscene and DueSouth chains, occupies a leading position in its space in the retail sector. It is well represented in shopping centres, CBDs, high streets and rural towns throughout southern Africa, and has built up a high reputation with the sporting fraternities and other interest groups which make up its target markets. It maintains a policy of clear differentiation between the chains in products, presentation and branding, generating this differentiation by active product innovation and selection and continuous updating of layout and display in the stores.
Totalsports retains its position as South Africa’s premier chain for sportswear and basic items of sports equipment. It stocks leading international brands of products to meet the everyday needs of sportsmen and sportswomen, together with complementary fashion products. The chain has well-trained and knowledgeable staff who provide customers with premium-level service in stores where there is a vibrant atmosphere.
The main sports and activities for which the chain caters are football, running, fitness and rugby, and customers have a wide choice of contemporary sportswear (including footwear) and essential items of equipment.
The sportscene chain stocks a blend of sports and fashion products directed mainly at youthful and fashion-conscious customers. Initiatives are undertaken outside the stores to keep the chain in touch with its target market. The image it cultivates is that of a fast-paced, urban, street-smart, energised shopping venue.
DueSouth caters for modern, hi-tech, outdoor enthusiasts who enjoy shopping in an environment which stocks a wide range of products that correspond to their lifestyle. The target market comprises the middle to upper income groups. As this is only the fifth year of trading the chain constantly updates its product range in order to cater fully for the market’s perceived tastes and to strengthen its market position.
The Sports division continues to be recognised by leading international suppliers of sportswear and sports equipment as a key retail distribution channel in South Africa. While the success of these international products is crucial to its continued growth, the division also supports a number of local manufacturers. In-house brands are furthermore used to provide margin flexibility and to enhance growth.
With three major football competitions in the offing in southern Africa, the division has spared no effort to prepare itself for the public interest which the competitions will awaken and the consequent demand for products stocked by the division’s chains. This activity will persist until well after the 2010 World Cup football competition comes to an end.
The three largest organisations active internationally in sportswear, Nike, Adidas and Puma, have officially recognised the Sports division as a preferred football partner for the 2010 World Cup, a status which will position the division to reap excellent benefits from that competition.
| 2009 | % change | 2008 | ||
| Turnover (R million) | sportscene | 470,2 | 13,3 | 414,9 |
| Totalsports | 727,5 | 12,7 | 645,4 | |
| DueSouth | 99,1 | 8,8 | 91,1 | |
| Total | 1 296,8 | 12,6 | 1 151,4 | |
| Number of stores | sportscene | 105 | 16,7 | 90 |
| Totalsports | 134 | 19,6 | 112 | |
| DueSouth | 25 | 31,6 | 19 | |
| Total | 264 | 19,5 | 221 | |
| Floor area (gross m²) | sportscene | 23 474 | 21,1 | 19 379 |
| Totalsports | 35 645 | 26,6 | 28 149 | |
| DueSouth | 8 206 | 20,5 | 6 810 | |
| Total | 67 325 | 23,9 | 54 338 | |
| Number of employees | 2 132 | 26,8 | 1 681 | |
REVIEW OF THE YEAR
Trading conditions in the past year continued to be subdued. Consumer confidence has taken a severe knock since the implementation of the National Credit Act in 2007, and the high interest rates and inflationary pressures which prevailed until the year-end have not favoured retailers.
Despite this unfavourable climate the division achieved total turnover growth of 12,6% and same store growth of 5,3%, ensuring that the division maintained its position as a market leader. What is particularly pleasing is that turnover growth in the second half was 15,1% compared to the first half growth of 9,8%. Same store growth in the second half was 6,1% compared to the first half growth of 3,5%. A total of 45 new stores were opened.
The division’s markdown levels have remained well controlled and at acceptable levels.
| 2005 | 2006 | 2007 | 2008 | 2009 | |
| Markdown value (Rm) | 92,7 | 132,0 | 133,8 | 160,8 | 152,0 |
| % of sales | 11,5 | 12,8 | 11,1 | 12,3 | 10,3 |
The imminence of the Confederations Cup 2009, AFCON Cup 2010 - take over and the 2010 World Cup is already creating intense interest among football followers and this is beginning to be reflected in the mix of goods passing through the division’s stores. There will be further opportunities as international teams with many local followers visit the region and generate demand for products bearing the teams’ logos and other identifying features.
Emphasis continues to be placed on training programmes for staff members in order to ensure that customers entering the stores will receive technically competent and superior all-round service.
Co-operation with suppliers of major ranges of products continues to be good and the division has again participated in launches of new products in a strategic process to attain first-to-market status and reputation.
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.
Totalsports
Totalsports achieved turnover growth of 12,7% for the year, with same store growth of 5,0%. Its expansion policy continued with the opening of 24 new stores. Seven stores were refurbished.
While football is the predominant sport followed by customers of the division, rugby continues to gain momentum and fitness and running remain key sports in the strategy of this chain.
Streamlining was again undertaken to remove overlapping and substitutable product lines and add others in order to remain relevant to key sports categories. The objective has been to ensure a clearly defined offering by sport and gender.
Another innovation was the broadening of the range of Fusion own-brand products by the introduction of new core products in apparel, accessories and equipment.
The Totalsports chain also increased its participation in co-operative events with manufacturers and distributors of internationally-branded products in order to reinforce relationships both with these suppliers and with the public, and to raise awareness of the availability of these products in the stores. These relationships and the resulting consumer awareness will be important in the build-up to 2010 World Cup and to the business climate confronting Totalsports in later years.
Because of the growing public enthusiasm for the 2010 World Cup, the chain has expanded yet further its involvement in grassroots football events, interacting with more than 100 football clubs at various levels. These initiatives with the target market are supplemented by sports clinics for the staff of the chain, so building up the knowledge base and increasing commitment and energy at store level.
sportscene
Competition was again intense in South Africa in the past year, particularly as a result of the further advance of international market participants.
The youth fashion market is recognised internationally as presenting opportunities for suppliers of major brands of sports products. This has led to the arrival of waves of new products. The suppliers have globally intensified their marketing activities and they compete aggressively with each other for retail presence, whether in the increasingly common own-brand stores or in the stores of traditional retailers. They take global initiatives in strategic direction, the ranges of products offered, and promotional activities.
The result in South Africa for retailers such as the sportscene chain has been increased competition but also the prospect of a growing market, the outlines of which can now be discerned and tapped into.
The sportscene chain has again played a part in this drive of the big international players by participating in the introduction of new products through launch campaigns and other promotional activities, so ensuring that it would be first-to-market and would gain publicity in its own right.
The relentless pace of change in the youth market requires ongoing review of the chain’s marketing strategy. This brings about continuing change in the ‘look and feel’ of marketing communication in order to keep it in step with fashion and hence deal effectively with competition.
A more intensive focus on sneakers and other footwear, aimed at enhancing the division’s leading position in this product category, has paid dividends. The own-label brand of Redbat continues to expand.
sportscene opened 15 new stores during the year and refurbished six stores.
In another year of volatile trading conditions the chain’s turnover grew by 13,3%, with same store growth of 6,5%.
DueSouth
DueSouth is the newest of the division’s chains. Much effort was expended on gaining increased public awareness for it and strengthening its reputation in the outdoor lifestyle market. The chain has two exclusive international ranges, The North Face and Columbia, and this exclusivity has helped to enhance the chain’s market position, although pricing of this product poses a challenge for the future.
The chain also provides products under the in-house DueSouth trademark, which play an accessible alternative and complementary role.
The product range continues to evolve, and in the past year additional well-recognised and internationally-known ranges of apparel and footwear, both for women and men, were introduced, together with an enhanced range of accessories and equipment.
Following a review of the chain’s stores in the 2008 year a programme was started last year to enhance store presentation through increased lighting and the re-configuration of shopfronts. A visual merchandising initiative has also demarcated clearly the lifestyle and performance areas within the stores, and has helped to identify the trail-running, mountain-biking, outdoor and exploration categories. It is clear that these changes, which are continuing, have been welcomed by customers and that they serve to enhance the character and individuality of the DueSouth stores.
DueSouth continues to expand and six new stores were opened in the past year.
Sales growth was disappointing at 8,8%, with same store growth of 0,1%. This chain can do much better, but it needs to have a broader appeal.
STRATeGy
All of the chains in the division are given equal opportunities to achieve their best possible performance.
In the Totalsports chain there will be emphasis in the coming year on maximising the public’s growing awareness and enthusiasm for the major football competitions referred to above, and providing an optimal selection of products for players and supporters.
There will be continued interaction with the customer base through targeted local events, promotional initiatives around the introduction of new products, and the division’s own national event sponsorships. These are all tools to gain awareness in the marketplace.
In the sportscene chain, following from the strategy review undertaken previously, there will be ongoing action to keep the chain aligned with its fast-moving target youth market. Emphasis will again be placed on building strength in the footwear category and in strengthening the chain’s position in popular internationally-branded products.
DueSouth will retain its existing objectives and its product ranges will be supplemented by new products and new categories of products. Sponsorship of the DueSouth xterra Multisport event will continue.
The division will again participate actively in the group’s supply chain initiative with the objective of bringing products into the stores even faster and thus improving efficiency and stock turn.
Good expansion opportunities have been identified in several geographical regions and the division has committed to ten new Totalsports, nine sportscene and three DueSouth stores, and further opportunities are being pursued.
PROSPECTS
Trading conditions are expected to be difficult in the new financial year, particularly the first half, with an expectation of an upturn towards the end of the year. In spite of these conditions the division expects to produce acceptable growth.
| Store statistics | Projection | ||||||
| 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | |
| Totalsports | 94 | 97 | 106 | 112 | 134 | 146 | 160 |
| sportscene | 74 | 79 | 86 | 90 | 105 | 115 | 125 |
| DueSouth | 9 | 14 | 16 | 19 | 25 | 28 | 34 |
| Total no. of stores | 177 | 190 | 208 | 221 | 264 | 289 | 319 |
| Franchise stores | 1 | 1 | 1 | 2 | 2 | 2 | 2 |
| Closures | 2 | 2 | – | 3 | 2 | – | – |
| Floor area (m2) | 40 643 | 44 221 | 48 858 | 54 338 | 67 325 | 71 903 | 80 323 |
