Home renovators boost Italtile profit
During a tough economic climate, companies usually have to tighten their belts. But Italtile Ltd is seeing growth opportunities as local consumers opt to renovate their homes, rather than buying new ones, Italtile CEO Nick Booth told Finweek.
Indebted South African consumers, who are still reeling from the bubble in unsecured l ending a nd t he s ubsequent collapse of African Bank, formerly the largest lender of its sort, are still shy of buying new property. And banks are shy to forward credit.
This boasts a potential chance for Italtile Ltd to capitalise on the homeimprovement market, according to its CEO Nick Booth.
“Rather than selling their homes and buying new ones, owners are renovating,” Booth, who took over as CEO in July 2014, told Finweek, following the announcement of the group’s annual results at the end of August.
It al t i l e Ltd, t he owners a nd franchisor of retailers such as Italtile, CTM and TopT, that sell local and imported home-f inishing products posted a 37% jump i n prof it and increased its total dividend by almost a third.The company’s system-wide revenue rose 17% to more than R5.2bn for the 12 months ending 30 June. Same-store sales rose 16% compared with t he previous f i nancial year. Italtile Ltd forfeited margins in a bid to keep its market share in a struggling consumer market.
“We saw resilience in the lower LSMs as consumers in those bands don’t worr y too much about t he exchange rate and big picture economy. They just want to improve their homes,” said Booth.
While the group’s top-end retail brand, Italtile, took the brunt of the rand’s depreciation over the period as it relied on imported products the most, its TopT brand was rolled out faster than the company anticipated.
With its store sizes of bet ween 500m2 and 600m2, the company is able to expand into outlying and rural areas where it is underrepresented and where higher-value offerings of homeimprovement products, such as Tivoli taps and imported tiles, are not readily accessible, Booth said.
“What TopT in rural areas offers consumers now is a one- stop shop where they can buy all their homeimprovement products,” according to Booth. “This is especially important in light of high travelling costs in these areas.”
Wealthier consumers were more ret i cent i n t heir spending as t he
ITALTILE LTD POSTED A 37% JUMP IN PROFIT AND INCREASED ITS TOTAL DIVIDEND BY ALMOST A
Going forward, Italtile hopes to open between five and 10 new TopT stores annually.