Majority shareholder Vestacor works at turning retailer around
HAVING BOUGHT STUTTAFORDS – a retailer in dire need of resuscitation – eight months ago, Vestacor has wasted no time in figuring out how to restore the business to its former glory.
“These past few months have been exhausting but exhilarating,” says Vestacor CEO, Bruce Rubenstein. Vestacor – together with Ellerine Brothers and Retail Ventures – bought the business from former CEO and unrehabilitated insolvent Charles Fox (while Rubenstein is not keen to divulge how much of the business each shareholder has, he says there are no legacy investments from the Fox family).
The business is undergoing a complete overhaul. From new IT systems, an increased staff:customer ratio, retraining store managers and floor staff, doubling the number of buyers, to – crucially – a new look, everything to do with the beleaguered retailer is being improved.
The Stuttafords brand has been revamped, with the staid yellow-and-black logo being replaced by a black, grey and white theme that’ll be carried throughout the stores.
“By June, some of the physical changes to the brand will be in stores,” says Rubenstein. “Stuttafords has been an umbrella covering a fruit salad of brands, with none making a statement. The new brand unites them.”
The “store within a store” concept will therefore stay, but instead of coming across as a “kitchen sink” full of brands, he says, each of the brands will be represented in black and white, with a single colour associated with the brand (for example, red for Levi’s) standing out.
The number of stores is also being rationalised from a current 23 to between 17 and 20 in major cities. “We want to position Stuttafords much more upmarket; the idea is to be a small and exclusive group carrying a few items in a broad range of categories. We are not a chain store and want to be the reference point in the market for service.”
The only new store on the cards for the next two years is at the plush Melrose Arch complex in Johannesburg.
While Rubenstein has been nose to the grindstone getting Stuttafords back on track, he plans to step back once things are run- ning smoothly. Former Arthur Kaplan CEO Alfred Emdon has been appointed chief operations officer, and he will take over the helm from Rubenstein.
This will leave Rubenstein to concentrate on finding new opportunities, of which, he says, there are no shortage. “A number of retail businesses have good cash flows at the moment, and the multiples are not reflective of their success. The likes of Nu Clicks, Mr Price and Truworths could in his view look very attractive to private-equity buyers.”
Rubenstein also hinted at action involving the other retailer in the Vestacor stable, music and gaming business Look & Listen. “The business has loyal customers and excellent management. This is not definite, but it’s a business we could look at listing if we felt it was appropriate.”
Vestacor’s plans for Stuttafords include bringing new brands into the business. The company recently announced it would be bringing US retailer GAP to the market, though litigation over trademarks could stymie its entrance (see story below).
Other new brands in the pipeline include another Gap brand, Banana Republic, “which will hopefully be in stores by winter”, according to Rubenstein, and iconic US brand Gant.
Stuttafords is involved in talks to bring other jeanswear, cosmetics and lingerie brands into SA, and is also “actively pursuing” several footwear brands.
Can Vestacor pull off the turnaround of this beleaguered retailer? The company has grown some successful businesses (such as Sportsmans Warehouse, Outdoor Warehouse and Sportshoe World parent Moresport), but there have been a few bad blips on the radar associated with Vestacor’s management.
Investors will remember Protea Furnishers (Profurn), which was chaired by Vestacor chairman Gerald Rubenstein. In 1998, he approached German investor Claas Daun – then the controlling shareholder of Morkels, Totalsports and Logan’s Sportsmans Warehouse parent Moregro – with a strategy to merge the two firms’ retail businesses. The result was that Profurn bought Morkels while the sports retailers were merged with Vestacor’s Sport ’n Leisure and listed as Moresport (Vestacor was at this stage only a 20% shareholder).
Profurn tried to ratchet up market share in the overtraded furniture retail environment by expanding aggressively and granting credit easily, the result being a debtors book that “was largely uncollectable and hand loans that were unpayable”, as Finweek wrote at the time. The business was ultimately bought out by JD Group.
Foschini bought Totalsports (which was part of the stable at the time); Moresport was then delisted and became a wholly owned subsidiary of Vestacor. In September 2006, Ethos Private Equity and Moresport management bought the company (which now comprises Sportsmans Warehouse, Outdoor Warehouse and Sportshoe World) for R681m, after the Competition Tribunal prohibited Massmart from buying the business. Rubenstein says Moresport was finally sold at a p:e multiple “in excess of 10”, which was above the average p:e of the retail sector at the time.
Getting away from a “kitchen sink” full of brands. Bruce Rubenstein