Financial woes hit Sth African retailers
Two South African retail giants with a New Zealand presence are both under financial pressure.
Woolworths Holdings, which owns the David Jones department stores and the Country Road Group of clothing stores, said this week that it will reassess the value of David Jones in Australia.
David Jones owns one New Zealand store, in Wellington, which opened to much acclaim in 2016.
Woolworths, South Africa’s largest food and clothing retailer, noted last year that discretionary spending in Australia was low due to heavy mortgages, underemployment and low wage growth.
The company has also invested heavily in David Jones’ stores and inventory systems since it bought the business in 2014 for A$2.1 billion (NZ$2.29 billion).
Shares in Woolworths fell to a near two-year low, as it flagged that earnings per share for the 26 weeks to December 24 were likely to fall as much as 17.5 per cent.
Woolworths’ revenue increased by 2.5 per cent but sales fell 3.7 per cent at David Jones. Sales were also down in its South African fashion, beauty and home division.
The sale of a landmark David Jones store in Sydney in the prior period also affected the earnings per share.
South African website Fin24 said Woolworths had spent A$284 million between 2016 and 2017 to reposition David Jones and its Country Road, Witchery, Trenery, Politix and Mimco brands.
An attempt to introduce its home-grown private label brands into David Jones stores had also ‘‘flopped as the quality and fashionability of merchandise didn’t resonate with Australian shoppers’’.
Meanwhile, Steinhoff International Holdings, the ultimate owner of New Zealand clothing chain Postie+, has suffered a share price plunge of more than 80 per cent after reports of an accounting scandal and the appointment of PwC to look into its books.
German regulators are investigating whether the company inflated its revenues, British newspaper The Telegraph reported.
The company has delayed its
2017 results and will restate its
2016 results.
Former chief executive Markus Jooste quit abruptly last month, and its billionaire chairman Christo Wiese, South Africa’s fourth-richest man and Steinhoff’s biggest shareholder, has also stepped down.
As a result, there has been speculation that Steinhoff, which is listed in South Africa and Germany, will be forced to sell of some off its assets.
In Australia, its brands include Freedom, Fantastic Furniture, Best & Less and Harris Scarfe department stores.
Steinhoff is sometimes referred to as the Ikea of Africa but more than half its revenue comes from businesses in Europe. It owns more than 40 brands across 12,000 stores and employs 130,000 people.
‘‘For all our brands in the Steinhoff Asia Pacific group, and our 10,000 employees, it is business as usual,’’ Steinhoff Asia Pacific’s chief executive Michael Ford said last month.
Total sales across Australia and New Zealand rose 3.1 per cent in the 12 months ended November 30 last year, Ford said.
However, it had appointed law firm Minter Ellison and corporate restructuring firm Ferrier Hodgson ‘‘to provide strategic advice in relation to legal, financial and corporate matters’’.