Dip­ping toe into new mar­kets

But still in the early phase

Finweek English Edition - - Companies & Markets -

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

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