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

Financial Mail - Investors Monthly - - Front Page -

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

Pic­ture: AN­TOINE ANTONIOL/BLOOMBERG

The snap­ping-up of Con­forama was an im­por­tant step for Stein­hoff

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