Life sup­port

Ma­jor­ity share­holder Ves­ta­cor works at turn­ing re­tailer around

Finweek English Edition - - Business strategy - ANA MON­TEIRO

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

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