Dipping toe into new markets
But still in the early phase
HOME IMPROVEMENT RETAILER Italtile’s full-year performance has been dubbed “impressive” by a fund manager when compared to its peers. “It actually maintained its turnover growth from the interim period, which is quite impressive compared to other retailers in general that have had their sales slow down over the past six months,” says Coronation Fund Managers’ Siphamandla Shozi.
Cashbuild’s like-for-like volumes are up around 3%, while Illiad’s like-for-like volumes are down 4%, Shozi says. For the year to endJune Italtile’s turnover climbed 7% to R2,77bn and its trading profit increased 2% to R399m. “It seems Italtile has taken some market share from importers, who must have been struggling under a weak rand environment.”
In addition, Italtile managed to reduce the overstocked position it held at the interim (end-December) stage, says Shozi, as it successfully decreased inventory by 19% to R263m. “It’s a good result given the tough environment that the group’s target market finds itself in. Things look like they’ll get better from here, especially given indications that interest rates may come down.”
Italtile is also experimenting with new customer segments, launching a new brand that targets rural towns and smaller markets. Its third brand – known as Top T – is diversifying the group’s focus away from its traditional middle-class customer segment, catered through its CTM and Italtile brands.
Italtile CEO Gian-Paolo Ravazzotti says the trial offering – which he labelled “relatively low risk” – comprises a smaller store format that caters to the highly price-sensitive entry-level market. Four Top T stores (all group owned) opened during the year, three CTM stores (Lenasia, Vanderbijlpark and Roodepoort) were rebranded, as was the Italtile store on Route 24 near the OR Tambo International Airport north of Johannesburg.
However, Ravazzotti says the trial is still in an early phase and declined to comment on whether it was a success or not, as the stores hadn’t been opened long enough or within the reach of that specific target market. But should the trial be deemed successful, Italtile would “slowly start to open more stores” in areas like King William’s Town in the Eastern Cape and Oudtshoorn in the Western Cape. Ravazzotti says Top T stores have a slower turnaround than CTM stores. “Five Top T stores are the same as one super-CTM.”
Relatively low risk. Gian-Paolo Ravazzotti