Can Steinhoff's imperious Jooste conquer the world?
Moving at dizzying speed, Steinhoff and its chief executive Markus Jooste know where they are going, writes Stafford Thomas
n the tough world of international retail, scale is the name of the game. It is a game that Steinhoff CE Markus Jooste is playing aggressively as he races the group up through the ranks of the world’s mega-retailers.
Jooste’s resolve to gain scale has taken Steinhoff from a group with revenue of €3.8bn in 2010 to one with revenue of €13.1bn in the 12 months to June 2016. Operating profit of the group, which now trades through more than 11,000 stores in 32 countries, soared from €510m to €1.5bn in the six years.
On a revenue basis Steinhoff was already ranked as the world’s 101st biggest retailer in 2014, in Deloitte’s most recent Global Powers of Retail survey. Steinhoff’s revenue showing in its latest 12 months would rank it at around 65th.
Key drivers of scale have been two transformational deals pulled off by Jooste. First came the €1.2bn acquisition of Conforama, France’s second-largest furniture retailer, in January 2011.
IConforama boosted Steinhoff’s annual revenue by almost 60% and made it the world’s second-largest furniture and household goods retailer after Ikea. Jooste followed up the Conforama deal in March 2015 with the even bolder acquisition of Pepkor from Christo Wiese and his listed holding company Brait in a R62.8bn (then €4.8bn) cash and share deal.
It also left Wiese as Steinhoff’s biggest shareholder through a 17.9% stake held by his Upington Investment Holdings vehicle.
Despite having achieved incredible growth in scale, Jooste’s strategy has been met with ongoing scepticism in the market. Conforama could be too big for Steinhoff to swallow, was the general cry of concern that went up in 2011. The market signalled its concern by valuing Steinhoff on a less than flattering 7.7 p:e at the end of its June 2011 financial year.
Reaction to the Pepkor deal revolved around concerns that Steinhoff had overpaid. Arguably,
But it is not a case of buy at any price. This year Jooste has walked away from two listed acquisition targets
with the deal valuing Pepkor on a hefty historic 37.4 p:e, it did overpay. But for Steinhoff, Pepkor represented an exceptional asset providing it with an instant, big-scale entry into discount clothing and general merchandise retailing and a reach now spanning 18 countries through almost 5,000 stores.
At the time of the Pepkor deal, Jooste described it as a “fairytale story” for Steinhoff.
Steinhoff has a parallel in Shoprite. To gain the scale needed to stand up to a then-dominant Pick n Pay, Shoprite CE Whitey Basson knew the only route was through an aggressive approach to acquisitions.
Basson, with the backing of
The snapping-up of Conforama was an important step for Steinhoff