Apparel Retail dressed for sales success

Local clothing outlets are feeling the effects of foreign chains’ attraction for SA consumers

By Colleen Goko for Business Live
The global operation of fashion brand Hennes & Mauritz (H&M) may be squeezed by online businesses Zara, Asos and others, but locally the Swedish giant is eating into the profits of competitors’ chains.

Though many SA companies have bemoaned the constrained state of consumer spending, due, among other things, to the depressed economic environment, footfall at H&M’s stores across the country has remained high.

A quarterly update released last week shows that in the three months to end-February H&M reported a 39% increase in sales in rand terms. That equates to about R356m from the nine stores it operates.

H&M’s success comes at a time when stalwarts of the local apparel sector are in flux.

Edcon, the owner of Edgars, has begun the long process of digging itself out of a hole following the completion of its debt-to-equity deal.

The business rescue plan of Stuttafords was adopted by its creditors in March. CEO Robert Amoils says the company has completed the process and is now a “rescued entity” with plans to make some sweeping changes.

The House of Busby has shut down its stand-alone Mango and Nine West stores. Head of marketing Leane Adolph says this alteration of the group’s portfolio was undertaken to match local needs. She rejects speculation that the group has been under strain or headed for business rescue. But market commentators have said that its financial situation is precarious.

Listed players also aren’t faring so well, with the exception of TFG. Truworths, Woolworths and Mr Price all released statements with a cautious tone at the beginning of the year.

It’s likely that local companies will try to claw back market share in 2017. But Mergence Investments equity analyst Peter Takaendesa says while foreign players such as H&M add to the level of competition, they account for a very small percentage of the sector and their sales numbers come off a low base. He says H&M and other multinationals have done well locally because of effective marketing and possibly a “better-positioned product offering”.

In Sandton, a young shopper says the likes of H&M have a wider range of good products to choose from. In addition, the pricing of the products is “friendly to the pocket”.

“You can walk in there and expect to get a good top for R150. You can’t say the same for Mango and Truworths. When Mango was open I never even used to step into the store because I knew the price would ‘kill’ me,” she says.

H&M SA will have 11 stores in operation by April 8. SA spokesman Amelia-May Woudstra says more branches may open during the year, but that is still to be decided.