Truworths investors state their feelings
THE views of Truworths International shareholders were clear when its share price plunged 7% the day after a poor trading update and news of a successor to CEO Michael Mark.
Frenchman Jean-Christophe Garbino of Kiabi Europe SAS was anointed as the successor to Mark, who created one of the most highly regarded and successful clothing retailers over his 23 years in charge, underscoring a recent trend in which the top position at local retailers has increasingly gone to foreigners.
In recent years, Englishman Richard Brasher has taken the reins at Pick n Pay, Australian Ian Moir has taken Woolworths to new heights, while German Jürgen Schreiber has been tasked with keeping Edcon’s head above water — leaving SAborn retail hotshots such as Whitey Basson looking increasingly isolated.
Still, it appears Truworths investors were more spooked by the trading update than by Mark’s departure. The Truworths trading update said that sales for the 18 weeks to November had risen 4.7% to R3.7-billion, with cash sales rising 5.4% and credit sales (which provide nearly 70% of its sales) rising only 4.5%. This was less than last year’s growth, and also lower than analysts expected.
Though Truworths has climbed from R15 a decade ago to about R68, this year it has come under heavy pressure, falling 18% as retail stocks fell sharply out of favour.
This means Garbino will take over at perhaps Truworths’s most vulnerable time in recent years, with a growing number of overseas brands jostling for space in the market.
This is despite the fact that Mark has built Truworths into a company with some of the most revered trading metrics in the business: An operating profit margin of 34.5% and a return-on-assets ratio of 46% are among the best in the world.
He has not renewed his contract, which expires next year.
Mark had said his successor had to be different from him — and Garbino fits the bill.
Said Mark: “I inherited a much smaller business, which was making R60-million profit at the time and it now makes in excess of R3-billion.”
Mark said the group would look within Southern Africa, Africa and beyond.
Garbino would also fit one of the other characteristics that Truworths wants — someone who understands the international side of sourcing.
He had been at the helm of the French company since 2007, during which time it had more than doubled its stores to 450 outlets in eight European countries.
Kiabi started 35 years ago in northern France and is a big retailer in European clothing with its affordable fashion concept and effective distribution.
Among Kiabi’s big competitors are Spanish retailer Zara and Irish retailer Primark.
“Kiabi is a fashion retail chain that sells commercially priced fashion apparel to ladies, men and children,” Truworths said.
“It employs more than 7 500 people and delivered revenue of about à1.5- billion in its most recent reporting period.”