Foschini Ar 2010 Review of Operations and Services Operations

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T4IB02815-Foschini AR Com.indd 38
FOSCHINI
FOSCHINI GROUP ANNUAL REPORT 2010 - Page 38 OPERATIONAL REVIEW – FOSCHINi division
FOSCHINI GROUP ANNUAL REPORT 2010 - Page 39
Foschini
division
The Foschini division remains the primary womenswear fashion division
in the group.
POSITIONING target market is the LSM 6 – 10 categories. The largest developments were in the
Most of the stores are located in prime following shopping centres:
The Foschini division is the womenswear
fashion division in the group, comprising shopping centres, with a recent roll-out to
secondary malls and some CBDs. Hemmingways a new regional centre in
the Foschini, fashíonexpress, donna-claire East London
and Luella chains. Luella, a relatively new chain, is devoted
Amanzimtoti a new regional centre
Foschini supplies contemporary clothing, to footwear and handbags, offering
south of Durban
footwear and cosmetics, its target reasonably priced products in a modern
market being 18 to 35 year olds in the international store format. All the Luella The Reds an extension to the
LSM 6 – 10 categories. Foschini stores are stores are in key shopping centres. existing mall in
located in prime shopping centres and Centurion
CBDs. REVIEW OF THE YEAR The Grove a new centre in Pretoria
fashíonexpress is a value chain, In total, 27 new stores were opened East
supplying clothing and footwear for during the 2010 year across the division’s
four chains. In addition, nine stores were Stores were also opened in smaller
customers in the LSM 5 – 9 categories. Its
stores are located in smaller towns and in enlarged or relocated. centres including Gugulethu Square,
secondary positions in shopping centres. Mafikeng Mall, Limpopo Mall and Bridge
A total of almost 12 000 square metres
City.
donna-claire supplies fashionable clothing of retail space was added during the year,
for larger-sized women of all ages. The representing growth of 5,6%.
2010 % change 2009

Turnover (R million) Foschini 2 560,4 6,6 2 402,5
fashíonexpress 396,9 14,3 347,2
donna-claire 310,0 (4,8) 325,5
Luella 38,7 36,7 28,3
Total 3 306,0 6,5 3 103,5
Number of stores Foschini 223 2,8 217
fashíonexpress 126 9,6 115
donna-claire 88 7,3 82
Luella 17 (5,6) 18
Total 454 5,1 432
Floor area (gross m2) Foschini 159 343 5,0 151 728
fashíonexpress 36 836 7,6 34 221
donna-claire 23 949 8,3 22 106
Luella 2 426 (6,8) 2 604
Total 222 554 5,6 210 659
Number of employees Foschini 4 059 (1,8) 4 133
fashíonexpress 626 4,5 599
donna-claire 503 1,8 494
Luella 89 (6,3) 95
Total 5 277 (0,8) 5 321
Most significant countries from which
merchandise is imported China China
Abigail Bisogno
T4IB02815-Foschini AR Com.indd 39 2010/07/27 4:46 PM

The adverse economic conditions

experienced towards the end of the
previous year continued into the 2010
year. In spite of this unfavourable
economic climate the division achieved
OPERATIONAL REVIEW – FOSCHINi division CONTINUED
creditable turnover growth of 11,0% in

the first half, thanks largely to a winter
range which was more successful with
customers than had been the winter
range of the previous year.
From October 2009, with the onset
of summer, a slow-down in consumer
demand became more evident. This was
exacerbated by a shortage the division
experienced of casualwear products in
a season where the trend was towards
casual product. The division’s formal
fashion-directed brands such as Oasis
and WWW struggled, while the casual
labels News and Instinct enjoyed a lift in
sales. Turnover in the second half grew by
2,5%, with the result that growth for the
full year was 6,5%.
Investing in talent development is an
ongoing focus to ensure a supply of
talent and skills to meet the division’s
business requirements. Details on the
group’s human resource activities –
including employment equity, skills
development, and occupational health
and safety – are provided in the Human
Resources review.
Progress has again been made in the
group’s supply chain initiative, with
tangible benefits in terms of the time
spent by merchandise in the division’s
distribution centre and elsewhere in
the supply chain. Further details on the
nature of our supply chain management
and auditing activities are provided in
Supply Chain and Group Merchandise
Procurement reviews. The aim of
these activities is to ensure reliability,
speed, quality, value and flexibility in
our supplier relationships, while also
maintaining appropriate ethical, labour
and environmental performance standards
amongst suppliers.
Cosmetics
The cosmetics business has continued
its steady growth and turnover in the
full year rose by 13,1%, with growth in
comparable stores of 8,7%. Turnover in
this category now exceeds R600 million.

Foschini
division
The Foschini cosmetics range brings introduction was completed by the end and Hemmingways in East London.
together a number of major international of 2009 and MTN’s stock issues had also All of these are stores of more than
brands including Clinique, Elizabeth Arden, by then improved. It was encouraging to 1 000 square metres in area.
L’Oreal, Revlon and Yardley. In most of the observe a prompt positive response, with The new stores have traded below
new-format stores in shopping centres sales growths of 32% being achieved in their potential as customers take time
the cosmetics departments have their February and 16% in March. to change their shopping patterns by
own entrance, creating a standalone
With the recent creation of the Group gravitating away from earlier shopping
ambience. It has once again been shown
Technology division the cellular venues.
that this layout increases footfall and
benefits the other departments of the department within the Foschini division
Foschini stores. will be managed centrally.
Cellular products Foschini

Cellphones had a disappointing year. Clothing sales in the Foschini chain grew
After numerous years of double-digit by 7,0% year on year. The contrasting
growth the business contracted by 8,2%. winter and summer performance was
Turnover was R230 million as against most pronounced in this chain, with first
R250 million in the previous year. half sales rising 14,5% and sales in the
second half showing no growth over the
Prior to 2010, the group’s strategy was to
comparative period of the previous year.
act as an exclusive MTN retailer selling
the handsets of all manufacturers on Total turnover of the chain, including
a prepaid basis. Sales declined, largely the Cosmetics and Cellular departments,
because of stock shortages on the part of grew by 6,6% over the full year.
MTN which persisted until two months
Nine new Foschini stores were opened
before the end of 2009.
during the year, the most significant
During the past year Vodacom was of these being the Galleria Mall in
introduced into selected stores. This Amanzimtoti, The Grove in Pretoria

OPERATIONAL REVIEW – FOSCHINi division CONTINUED
fashíonexpress donna-claire fashionable products that will appeal

to all South African women with fuller
This value chain, created initially out of The past year was one of disappointment figures. There is a strong emphasis on
smaller Foschini stores, had another good for donna-claire, with total turnover improving the fit of garments as well
year and has become well established in declining by 4,8%. as implementing appropriate pricing
the market-place. Built around the concept
This drop occurred despite the opening policies. The objective is to ensure that
of “express yourself for less”, this chain
of seven new stores and following on donna-claire shops become and remain
offers fashionable garments in a pleasant
the opening of 12 new stores in the the preferred shopping destination of the
shopping environment at prices that rival
those of traditional cash retailers. previous year. These additional stores fuller-figure customer.
have resulted in a high rate of growth in Historically the donna-claire chain served
Total turnover grew by 14,3%, with the running costs of the chain and in the
comparable store turnover rising by 4,5%. a relatively small niche market of older
absence of rising turnover the result has customers with largely conservative
fashíonexpress achieved consistent sales
been a significant decline in profits in this
over the year, the increase being 14,7% in tastes in fashion. With the repositioning,
chain. Profit was further reduced by a
the first half and 14,0% in the second. it is now imperative to appeal to a wider
higher volume of mark-downs.
group of customers, including young
The new store format has been widely
A project to reposition the donna-claire adults, who can expect to find well-
accepted and will continue to be rolled
brand started in the previous year and tailored garments in appropriate fashion
out both in newly opened stores and in
the course of conversion of existing older the vision underlying the new strategy styles. There will be a drive to grow
stores. Once completed, this programme has been communicated to all levels in market share and take the brand to a
will make the fashíonexpress image the business to ensure there is complete higher level of awareness and appeal.
consistent across all locations. acceptance and commitment to
The donna-claire chain also has a new
achieving the desired results.
During the past year 11 new stores were store design which is in keeping with
opened. The division is confident that The slogan “fashion to celebrate your the new brand image and should prove
this chain will continue to increase its curves” encapsulates the essence of attractive to customers in the target
turnover and profit contribution, and that the new donna-claire brand, with the groups. Early in the next year a new shop
it can easily expand to 150 stores. goal of supplying consistent ranges of window design will be introduced in the

Foschini
division
top 22 stores and this will reflect the new its profitability in the future. It has the October 2009 quarterly planning and
positioning of the brand. potential to be a 50-store chain. buying have been implemented in the
division, the impact of which should
Luella Quarterly instead of half- be felt during the next financial year.
yearly seasonality This allows a number of decisions to
Turnover in the Luella chain grew by
36,7% as compared with the previous Historically the division planned its be made with greater precision, among
year. The improvement was attributable operations on the basis of two half-yearly them the separation of styling from
to the arrival of more appealing ranges of cycles within a year’s trading and stock fabric buying decisions, the placing of
products in the shops and also to a high acquisition followed that pattern. This orders on a repeat and last-minute basis,
level of mark-down sales which disposed had the disadvantage that it was difficult and the control of stock levels. At the
of previous ranges. In spite of the if not impossible to secure prompt repeat same time the division has brought the
additional mark-down, profitability for consignments of fast-selling stock and design function for its products in-house,
the year improved and with the expected that predictions of trends in style and with designers now reporting directly
gains in the next year this chain will make customer choices could easily prove to to the managers of the division. There
an improved contribution to the division’s be misplaced since they were necessarily is improved integration between the
profits in the future. made long in advance. Hence business teams responsible for market research,
was lost because orders for new stock product design, buying, manufacturing,
During the year two unprofitable stores could not be placed at short notice. sales and market feedback. This process
were closed. One new store was opened will take time to unfold fully, but benefits
in the Hemmingway Mall in East London. Improvements made in the efficiency of
the group’s supply chain coupled with a are already being felt in speed to market,
The chain had 17 stores at the year-end, stock levels and in other respects.
better understanding within the division
all of which are in key shopping centres.
of the manner in which fashion trends
The division believes that there is further
Stock levels and mark-downs
occur among customers have allowed a
scope to improve the fashion level of the significant advance to be made in that it Stock levels at the year-end were within
products supplied by the Luella chain is now possible to operate on the basis an acceptable range and projected stock
and that, on this basis, it can improve of four quarterly stages in a year. Since levels are considered to be appropriate.

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FOSCHINI GROUP ANNUAL REPORT 2010 - Page 44 OPERATIONAL REVIEW – FOSCHINi division CONTINUED
Foschini
division
The medium-term goal of the division a broad customer appeal. Based on the In the next year the division will open
remains to reduce clothing and footwear current level of success, opportunities more than 25 new stores and will
mark-downs to between 10% and 12% exist to expand both the store base and upgrade approximately 15 CBD stores.
of sales, and to increase stock turn the product offering. These measures will add substantial
significantly. turnover and improve the visibility of the
STRATEGY AND PROSPECTS division to the consumer.
Supporting indigenous design
and supply There is general awareness that The division is currently rolling out
South African consumers are under lighting efficiency initiatives across its
Foschini launched a new brand, “Love pressure and that levels of disposable stores as part of efforts by the group
Movement by Stoned Cherrie” in income have declined. Despite this, the to reduce the environmental footprint
November 2009. This launch was Foschini division considers that it is well and increase the energy efficiency of its
underpinned by Stoned Cherrie’s vision positioned in terms of the number and stores.
to become a global African-lifestyle brand
quality of existing and planned stores and
in collaboration with a credible retail In addition the division will open its
its flexible buying processes to withstand
partner. Stoned Cherrie was established in first stores in Lusaka, Zambia, in
a continuation in the current economic November 2010.
2000 by Nkhensani Nkosi, a well-known
downturn. Its objective is to emerge
entrepreneur, TV personality and lauded
strongly, in order to capitalise on the Other significant venues for new stores
actress, making her one of the new voices
upswing which will follow. in the next year are:
of Africa. The adoption of this brand
represents visible commitment by the The division’s continuing investment of I’Langa Mall (Nelspruit)
Foschini group to social development in capital in its programme of new store Goldfields Mall (Welkom)
Africa and support for indigenous design openings and the refurbishment of Mamelodi Crossing (Pretoria)
and supply. existing stores, even during a period of Chris Hani Centre (Vosloorus)
“Love Movement” is currently in economic decline, is part of a long-term The division’s strength in the markets it
49 Foschini stores. This innovative range, strategy to capitalise on South Africa’s serves and its growth over the years are
consisting of African-inspired products proven pattern of economic growth reflected in the table alongside, setting
that simultaneously express old, new and despite periodic downturns in the out details of the numbers of stores in its
futuristic elements, has proven to have business cycle. four chains.
Mark-down statistics
2006 2007 2008 2009 2010
Mark-down value (Rm) 349,3 371,0 450,6 380,8 410,4
% of sales 15,1 15,1 17,4 15,0 15,2
Store statistics
Projection
2006 2007 2008 2009 2010 2011 2012
Foschini 201 207 211 217 223 230 235
fashíonexpress 90 97 100 115 126 140 150
donna-claire 59 64 70 82 88 93 100
Luella 6 18 19 18 17 18 25
Total No. of stores 356 386 400 432 454 481 510
Closures 6 3 5 2 5 2 2
Floor area (m )2
163 703 178 206 191 787 210 659 222 554 235 000 245 000

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markham
FOSCHINI GROUP ANNUAL REPORT 2010 - Page 46 OPERATIONAL REVIEW – MARKHAM
MARKHAM Internationally inspired menswear of good quality and value.
POSITIONING REVIEW OF THE YEAR Performance in cellphones and other

cellular products was disappointing
Markham is the largest men’s fashion The weakness which prevailed in the
retail chain in southern Africa. Markham economy for most of the year inevitably because of continued supply difficulties
stores are located in most major shopping had a dampening effect on sales, but at MTN. A second service provider,
centres and towns in this territory. In its overall turnover nevertheless grew by Vodacom, was introduced to selected
endeavour to make its customers “feel 3,7%. In comparable stores there was a stores in October 2009. Although this
great, look good and share our passion reduction in turnover of 0,8%. Results was followed by a rapid rise in sales
for style”, Markham provides up-to- in the first two months of the year there was nevertheless a drop of 5,1% in
date, internationally inspired menswear were promising, but from July 2009 a turnover for the year in these products,
of good quality and value, suitable for marked downturn set in, particularly in which accounted for 14,5% of the
all occasions and daily experiences. This towns where large-scale retrenchments division’s turnover.
is done from conveniently accessible had occurred in the mining and
stores, most of which offer a full range manufacturing industries. A symptom of Continued close control of mark-downs
of menswear, while others offer fashion the difficulties which customers faced and costs assisted the profitability for
casualwear only. was a trend in purchases to basic denim the year.
garments. Mark-downs made up 7,9% of sales.
While the division targets the LSM 6 – 10
range, the LSM 3 – 5 categories are also Although the price of product remained From trends known at this stage this level
buyers of its stylish apparel. Increasingly, effectively constant, changes in the of mark-downs is likely to be sustainable
shoppers tend to be younger men, often product mix resulted in a modest degree into the future. The table below sets out
in the age group 19 – 25. of product inflation. the apparel mark-down history.
2010 % change 2009

Turnover (R million) 1 359,6 3,7 1 311,7
Number of stores 234 4,9 223
Floor area (gross m )2
71 303 5,0 67 889
Number of employees 1 511 3,0 1 467
Most significant countries from which China, China,
merchandise is imported Mauritius, Mauritius,
Bangladesh Bangladesh
2006 2007 2008 2009 2010
% of sales 11,7 10,5 9,8 7,5 7,9
Manie Maritz

Repositioning of the Markham brand,

a process which commenced in 2005,
was continued and is clearly producing
benefits. In the next year the process
will be completed as regards the naming
OPERATIONAL REVIEW – MARKHAM CONTINUED
of the division’s smaller stores, which

originally traded as Markham Relay,
stocking only casualwear. They will all
be branded as Markham stores and will
include in their offerings a selected range
of formalwear.
A process known as “brand wrap”,
amounting to a modernisation and
rationalisation of visual display elements,
is under way and is proving popular
with customers. It eases the process
of “customer navigation” which leads
shoppers to the items which they
are seeking when entering the stores.
Completion of the brand wrap at one
of the division’s leading stores, in the
Canal Walk centre outside Cape Town,
has been followed by an immediate rise
in turnover at that store. The brand wrap
process dispenses with the notion that
visual presentation in all of the division’s
stores should be identical, and is flexible
and economical in its application.
Financial pressures which customers
are experiencing will, however, limit the
immediate gains to be achieved from this
initiative.
A range of products in the Guess brand
was introduced selectively in the second
half of the year and it is proving popular
with customers. Guess is widely seen as
an aspirational brand.
Another trend detected in spending
patterns was the re-emergence of jackets
as favoured garments both for formal and
informal occasions.
During the year 12 new stores were
opened and a further nine were relocated
or enlarged.
STRATEGY
The repositioning of the Markham brand
mentioned above has the objective

MARKHAM
of ensuring that Markham remains a During the year various measures were programmes for all staff members
relevant, aspirational brand, recognised implemented to reduce the environmental will be continued in order to ensure
for delivering fashion and style in a footprint and increase the energy that customers receive insightful and
sophisticated shopping environment. This efficiency of stores. These are described in efficient service and that the Markham
process will continue for some years. reputation is enhanced. Further details
the environmental performance review in
Formalwear is now well positioned in the the services section. on the group’s human resource activities
division and continuing growth in this – including employment equity, skills
Alongside the roll-out of new stores there development, and occupational health
area is being targeted.
will be strong emphasis on cost controls and safety – are provided in the Human
Space availability is one of the factors in a drive to enhance profitability. Training Resources review.
that set a ceiling on the growth of the
division in the past. A full-line Markham
store requires a substantial floor area and Store statistics
this has been unavailable in some malls Projection
in which the division would have liked to
2006 2007 2008 2009 2010 2011 2012
have stores. The current slower economic
conditions should provide opportunities Markham 180 191 201 223 234 248 262
to open full-line Markham stores in RJL 28 – – – – – –
centres where there are prospects of Total No. of stores 208 191 201 223 234 248 262
good turnover. The current conditions
Closures 13 29 – – – – –
also present opportunities to right-size
some over-sized stores and to open a Floor area (m )
2
58 764 58 230 61 298 67 889 71 303 75 176 79 053
number of smaller stores where this is
justified. The number of new stores which
are planned for the next year is upwards
of 12.

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FOSCHINI GROUP ANNUAL REPORT 2010 - Page 50 OPERATIONAL REVIEW – MARKHAM CONTINUED
MARKHAM
The division will implement the next The division’s efforts to develop closer PROSPECTS
phase of the group’s supply chain relationships with domestic suppliers
Menswear has been a victim of the
initiative to reduce lead times for in order to increase the level of local current poor economic conditions,
merchandise procurement and enhance production will continue. Greater reliance particularly in smaller towns where there
the efficiency of distribution, hence on local manufacture implies reduced has been much retrenchment and is likely
ultimately improving stock turn. One vulnerability to adverse changes in the to continue to feel the pinch. However
of the elements which will be taken exchange rate of the Rand, and this is a with the strategic steps outlined above in
further in the next year is the concept of longer-term goal. this report, together with the continuing
“hold-back” in the dedicated Markham roll-out of Markham stores, performance
Further details on the nature of the
distribution centre. in the next year is expected to be better
group’s supply chain management and
as consumer spending improves.
There will also be emphasis on auditing activities are provided in the
better fulfilment of customers’ size Supply Chain and Group Merchandise Markham will open its first store in
requirements, utilising for the second Procurement reviews. The aim of these Zambia in the next year.
year the group’s size-management activities is to ensure reliability, speed,
software which is designed to ensure that quality, value and flexibility in the
the size ranges of stock arriving at a store group’s supplier relationships, while
will correspond to historical sales. also maintaining appropriate ethical,
labour and environmental performance
The men’s fashion arena has limited local
standards amongst suppliers.
manufacturing capability but there are
fortunately a few sizeable companies Replenishment stock, replacing items
in the Western Cape with whom good recently sold, accounts for 19% of the
relationships exist and from whom good division’s turnover and emphasis is being
volumes of the division’s supplies can be increasingly placed on replenishment as
obtained. a strategy.

2010/07/27 4:48 PM
exact!
FOSCHINI GROUP ANNUAL REPORT 2010 - Page 52 OPERATIONAL REVIEW – EXACT!
exact!
Contemporary fashion for South African families.
POSITIONING exact! stores are located in shopping garments, a devaluing Rand and changes
malls, high streets and rural areas, and in the product mix.
The exact! division provides contemporary
fashion for South African families in the customers are offered a consistent
Both womenswear and menswear
LSM 5 – 7 categories. Clothing, footwear shopping experience wherever they
performed below expectations and
and accessories are sold at affordable choose to shop.
strategies have been implemented to
prices. The division sets out to provide reverse this trend.
carefully selected ranges with particular REVIEW OF THE YEAR
appeal to women and men aged 30 and Difficult trading conditions continued to The footwear department, which includes
upwards, as well as clothing and footwear plague the retail sector during the 2010 shoes for women, men and children,
for children aged between three and year. Sales were negatively affected, continued to perform well and sales in
12 years. highlighting the need to offer maximum this department increased by 14,6%
Cellphones and accessories complete the value to budget-conscious consumers. compared to the past year. Price inflation
product range. Overall, performance was subdued but was also lower in this department than in
turnover for the year nevertheless grew the other parts of the division’s business,
The concept of value for money by 2,2%. confirming that customers were very
remains a cornerstone of the division’s price-sensitive.
positioning, especially during tough Product prices crept upwards, particularly
economic times when consumers are during the summer season. This was Once again evidence emerged that
financially stressed and have limited the result of several factors, chiefly the as a category, childrenswear is more
disposable income. addition of authenticity and detail in the recession-resistant than some of the
2010 % change 2009

Turnover (R million) 759,8 2,2 743,5
Floor area (gross m²) 62 988 7,1 58 789
Number of employees (including those on
flexitime) 1 169 (3,9) 1 217*
Most significant countries from which China, India, China, India,
merchandise is imported Bangladesh Bangladesh
* Not compatible with number reported previously because different definition of “employment” used this year
A breakdown of sales by product category

Store location
in the exact! stores in the 2010 year is
% of set out in the following table.
turnover % of m2
Shopping malls 47,8 48,3 Womenswear 22%
High streets 28,5 25,0 Menswear 20%
Rural areas 23,7 26,7 Footwear (for men,

women and children) 22%
Childrenswear 13%
Accessories 3%
Smalls 3%
Cellular 17%
Suzanne Annenberg

OPERATIONAL REVIEW – EXACT! CONTINUED
other types of apparel, as adult shoppers

continued to cut back on their own
shopping in deference to the needs of 2006 2007 2008 2009 2010
their children. Boyswear enjoyed another Mark-down value (Rm) 84,6 91,0 104,3 105,3 146,3
year of outstanding performance, with
% of sales 14,6 14,3 15,8 15,2 20,3
sales growing by more than 18% off an
extremely strong base. Girlswear has not
yet reached its potential. Cellphone products saw a slight decrease ensuring that all contractual obligations
in their contribution to sales when are being met, including all legal, ethical,
Slow sales, particularly during the compared to the previous year, making environmental, labour, and health and
summer season, made it necessary up 17,0% of divisional turnover. During safety compliance.
to apply high mark-downs in order to the course of the year an additional During the course of the year the
liquidate stock which was perceived by supplier was brought on board. division opened ten new stores, relocated
customers to be expensive. This resulted
The division retains its goal of improving four, enlarged four and closed three.
in an uncomfortable level of mark-downs
the supply chain of products into its stores, The refurbishments and enlargements
as a percentage of sales.
in line with the group’s overall initiative of stores in Umtata, Rustenburg and
exact! continued to support local in this regard. Top priority was given to East London have proved particularly
clothing manufacturing through a strong projects initiated last year to optimise lead successful.
collaborative effort between its buying times. Some progress was made and more The division’s personnel development
teams and the group’s manufacturing is expected during the next year. activities continued to focus on
arm, TFGA. Because of product training programmes for store, area and
Further details on the group’s supply
requirements and the lack of local supply developing store managers, who play
chain management and auditing activities
in some categories of merchandise, local a key role in the relationship between
are provided in the Supply Chain and
procurement decreased for the year. exact! and its customers.
Group Merchandise Procurement reviews.
Cellphone sales decreased by 5,6%, An important development this year Performance measurement, succession
largely because of insufficient stock has been the introduction of a revised planning and talent retention are now
fulfilment by the primary supplier. supplier auditing process aimed at firmly embedded in the culture of the

exact!
exact! division. Further details on the
Store statistics
group’s human resource activities –
including employment equity, skills Projection
development, and occupational health 2006 2007 2008 2009 2010 2011 2012
and safety – are provided in the Human
Resources review. No. of stores 170 180 182 198 205 212 220
A corporate social responsibility project, Closures – 1 1 – 3 3 1

Ikusasa Lami, launched in conjunction Floor area (m²) 47 855 51 386 52 831 58 789 62 988 65 000 67 500
with the Gauteng Department of
Education for learners in grades 11 and aspirational and visually attractive for The division plans to continue its support
12, once again proved successful. customers. of community-based organisations.
Strategy On the employment front, it remains an

objective to provide rewarding careers
PROSPECTS
exact!’s vision to supply “surprisingly While the public’s spending on
to people from previously disadvantaged
affordable fashion to the modern family” discretionary items remains limited,
communities while ensuring that the
is supported by its strategy for 2011. supply of talent and skills matches signs of a recovery from the recession
In order to re-establish its value business requirements. are starting to be felt. Interest rates are
proposition, particular focus has been low and consumer confidence is nudging
The division intends to open more than upwards. While consumers will be hit
placed on offering the right product at ten new stores, to enlarge four and to
the right price. To this end strategies have by hikes in the cost of electricity and
relocate five, focusing on sites where transport, it is already evident that the
been designed to ensure a consistent mass shopping takes place. To increase
and smooth implementation of the exact! division, with its value formula, is
brand awareness, shop window and exceptionally well positioned to appeal to
goal of keeping the stores stocked at in-store branding with an emphasis on its target consumers.
all times with optimally selected and promoting value will continue to be
stylish “fashion solutions” (combinations developed. With its renewed focus on the product
of clothing, footwear and accessories) and price offering, and plans to expand
selling at moderate prices. The objective In the next financial year, the division will its geographical reach, exact! is ready to
is to enable customers to appreciate follow the example of other divisions in take advantage of the expected upturn in
these qualities when seeking easy-to- rolling out lighting efficiency initiatives the market.
combine and comfortable apparel, and so in its stores, to reduce levels of electricity
consumption. The group’s efforts to The concept of contemporary fashion
make exact! the preferred destination for
reduce its environmental footprint designed to appeal to customers aged 30
the target market.
are described in the environmental and upwards, plus their children, remains
Supply chain initiatives to increase speed performance review in the services an excellent exploitable opportunity for
to market and improve supply chain section. the exact! division.
flexibility will allow exact! to provide
more of the right merchandise where and
when it is most needed, with the ultimate
goal of maximising customer service.
With this objective in mind, a number of
initiatives are being designed to provide
a quick response to exceptional sales of
popular lines of stock.
Action plans are also being developed to
guarantee efficient and reliable sources
of supply which are sufficiently flexible to
meet exact!’s requirements.
exact! will continue to maintain high
standards in terms of merchandise
presentation and in-store aesthetics. This
will create an environment that is both

2010/07/27 4:48 PM
sports division
FOSCHINI GROUP ANNUAL REPORT 2010 - Page 56 OPERATIONAL REVIEW – SPORTS DIVISION
sports
division
The Sports division continues to occupy a leading position
in its space in the retail sector.
POSITIONING updating of layout and display in the fitness and rugby, and customers have a
stores. wide choice of contemporary sportswear
The Sports division, comprising the
Totalsports retains its position as South (including footwear) and essential items
Totalsports, sportscene and DueSouth
Africa’s premier chain for sportswear of equipment. For football enthusiasts
chains, continues to occupy a leading
and basic items of sports equipment, keenly awaiting the 2010 FIFA World
position in its space in the retail sector.
including ranges which are in particular Cup™ events, its stores are virtually a
Its product ranges, rival those obtainable
demand in the lead-up to the 2010 one-destination venue for the garments
anywhere in the world. It is well
FIFA World Cup™. It stocks leading and equipment they are likely to want,
represented in shopping centres, CBDs,
international and local brands of down to vuvuzelas.
high streets and rural towns throughout products to meet the everyday needs
southern Africa and has built up an of sportsmen and sportswomen and The sportscene chain stocks a blend
enviable reputation with the sporting supporters, together with complementary of fashion and sports products directed
fraternities and other interest groups fashion products. The chain has well- at youthful and fashion-conscious
which make up its target markets. It trained and knowledgeable staff who customers. Outside the stores the chain
maintains a policy of clear differentiation provide customers with premium-level keeps in touch with the target market
between the chains in products, service in stores where there is a vibrant through focused promotional and other
presentation and branding, generating atmosphere. initiatives. The image which sportscene
this differentiation by active product The main sports and activities for which cultivates is that of a fast-paced, urban,
innovation and selection, and continuous the chain caters are football, running, street-smart, energised shopping venue.
2010 % change 2009

Turnover (R million) sportscene 511,4 8,8 470,2
Totalsports 878,5 20,2 727,5
DueSouth 106,8 7,8 99,1
Total 1 496,7 15,4 1 296,8
Number of stores sportscene 114 8,6 105
Totalsports 148 10,4 134
DueSouth 29 16,0 25
Total 291 10,2 264
Floor area (gross m²) sportscene 26 436 12,6 23 474
Totalsports 39 226 10,0 35 645
DueSouth 9 128 11,2 8 206
Total 74 790 11,1 67 325
Number of employees 2 144 2 132
Most significant
countries from which
merchandise is
imported Total China China
Donald Gedye

DueSouth, now in its sixth year of

trading, caters for modern, hi-tech,
outdoor enthusiasts who enjoy shopping
in an environment which provides a
wide range of products that correspond
OPERATIONAL REVIEW – SPORTS DIVISION CONTINUED
to their lifestyle. The target market

comprises the middle- to upper-income
groups. The chain constantly updates
its product range in order to cater fully
for the market’s perceived tastes and
to strengthen its market position. In
its current phase it is consolidating its
market position with a broader base of
products than previously.
The Sports division continues to be
recognised by leading international
suppliers of sportswear and sports
equipment as a key retail distribution
channel in South Africa. While the
success of these international products
is crucial to its continued growth, the
division also supports a number of local
manufacturers. In-house brands are
furthermore used to provide margin
flexibility and to enhance growth. Having
access to a stable local manufacturing
base is particularly important when the
multinational players undergo periodic
stock shortages, as has happened in
recent times.
The division has spared no effort to
prepare itself for the public interest which
the 2010 FIFA World Cup™ events will
awaken and the consequent demand
for products stocked by the division’s
chains. This activity began to make its
contribution to turnover in the past year
and will persist until well after the
2010 FIFA World Cup™ matches come to
an end.
The three largest organisations active
internationally in sportswear, Nike, Adidas
and Puma, have officially recognised the
Sports division as a preferred partner
for the 2010 FIFA World Cup™, a status
which will position the division to reap
excellent benefits.
REVIEW OF THE YEAR

The impact of the global economic crisis
continued to be felt in the division’s
stores. Despite this, the division achieved
total turnover growth of 15,4% with

sports
division
growth of 6,1% in comparable stores. This
result enabled the division to maintain
its position as a market leader. Growth 2006 2007 2008 2009 2010
in comparable stores in the first half was Mark-down value (Rm) 132,0 133,8 160,8 152,0 176,2
7,8% and in the second half was 4,6%. A
% of sales 12,8 11,1 12,3 10,3 10,3
total of 27 new stores were opened.
Apart from lower demand which can be The prevailing shortage of skills in South the supply chain. Further details on
attributed to the economic downturn, Africa and the intense competition which the nature of the group’s supply chain
the division also found itself short of takes place to attract and retain talented management and auditing activities
stock at times and somewhat dependent employees, is an ongoing challenge.
for maintaining and, when necessary, are provided in the Supply Chain and
Details on the group’s human resource Group Merchandise Procurement
boosting stock levels on the supply lines activities – including employment equity,
of multinational suppliers, which are reviews. The aim of these activities is to
skills development, and occupational
beyond its control. ensure reliability, speed, quality, value
health and safety – are provided in the
and flexibility in the group’s supplier
The division’s mark-down levels have Human Resources review.
relationships, while also maintaining
remained well controlled and at
Co-operation with suppliers of major appropriate ethical, labour and
acceptable levels.
ranges of products continues to be good environmental performance standards
The 2010 FIFA World Cup™ has created and the division has again participated in
amongst suppliers.
intense interest among football followers launches of new products in a strategic
and this is reflected in the mix of goods process to attain first-to-market status During the year various measures
passing through the division’s stores. and reputation. were implemented to reduce the
Emphasis continues to be placed on Progress has again been made in the environmental footprint and increase the
training programmes for staff members in group’s supply chain initiative, with energy efficiency of our stores. Details
order to ensure that customers entering tangible benefits in terms of the time on these initiatives are provided in the
the stores will receive technically spent by merchandise in the division’s environmental performance review in the
competent and superior all-round service. distribution centre and elsewhere in services section.

OPERATIONAL REVIEW – SPORTS DIVISION CONTINUED
Totalsports products by the introduction of new sportscene

core products in apparel, accessories and
Totalsports achieved turnover growth of equipment. Competition was again intense in
20,2% for the year, with growth of 11,5% South Africa in the past year particularly
in comparable stores. The expansion The Totalsports chain also increased as a result of the entrenched position
policy continued with the opening of its participation in co-operative events which international market participants
14 new stores. No store refurbishments with manufacturers and distributors of have attained for themselves through
took place. internationally branded products in order strategies which include the opening of
to reinforce relationships both with these own-label stores and initiatives at various
Football is the predominant sport
suppliers and with the public, and to raise levels to attain dominance in segments of
followed by customers of the division,
awareness of the availability of these the retail industry.
with exceptional interest being shown in
products in the stores. These relationships
the past year in the lead-up to the The youth fashion market is recognised
and the resulting consumer awareness
2010 FIFA World Cup™ competition.
have been important in the build-up to internationally as presenting
Sales volumes of Bafana Bafana shirts
the 2010 FIFA World Cup™ and to the opportunities for suppliers of major
were far beyond expectations.
overall business climate that will confront brands of sports products. This has led
Rugby continues to gain momentum and Totalsports in the coming years. to the arrival of waves of new products
fitness and running remain key sports in and the heightened participation in
the strategy of this chain. Because of the growing public the market by the major multinational
enthusiasm for football, the chain has players referred to above. In the jousting
Streamlining was undertaken to remove maintained and extended its involvement
overlapping and substitutable product for retail presence which occurs, local
in grassroots football events, interacting
lines and add others in order to remain retailers with limited competitive muscle
with more than 100 football clubs at
relevant to key sports categories. The can easily be displaced, but the division’s
various levels. These initiatives with
objective has been to supply customers strength enables it to hold its own and
the target market are supplemented by
with ranges of products clearly defined by to some extent to turn the international
sports clinics for the staff of the chain,
sport and gender. pressure to its own advantage.
so building up the knowledge base and
Another innovation was the broadening increasing commitment and energy at The sportscene chain has again played a
of the range of Fusion own-brand store level. role in the participative activities of the

sports
DueSouth
division
big international players, including the exploration categories. It is clear that this
launches of new products, so ensuring process, which is continuing, has been
that it can be first-to-market and can DueSouth is the newest of the division’s welcomed by customers since it enhances
gain publicity in its own right. chains. Effort is still being expended
the character and individuality of the
on raising public awareness for it and
The relentless pace of change in the DueSouth stores.
strengthening its reputation in the
youth market requires ongoing review of outdoor lifestyle market. The chain has Four new DueSouth stores were opened
the chain’s marketing strategy. This brings one exclusive international range, The in the past year.
about continuing change in the “look North Face and this exclusivity has
and feel” of marketing communication in Total turnover growth of the chain was
helped to enhance the chain’s market
order to keep it in step with fashion and position. 7,8%, while turnover in comparable
hence deal effectively with competition. stores was lower, by 2,9%. This result
The chain also provides products under can be seen as a reflection both of the
A more intensive focus on sneakers and the in-house DueSouth trademark difficult economic climate and the
other footwear, aimed at enhancing which play an accessible alternative and teething stage of a young chain. Steps
the division’s leading position in this complementary role. have been taken to widen the appeal of
product category, has paid dividends. The
The product range continues to evolve the product ranges and to secure more
own-label brand of Redbat continues
and in the past year additional well- favourable sites for the chain in shopping
to expand. Cellphones and airtime have
recognised and internationally known centres.
been added to the ranges of products on
ranges of apparel and footwear, both
offer.
for women and men, were introduced, STRATEGY
sportscene opened nine new stores together with an enhanced range of In the Totalsports chain there will be
during the year and no refurbishments accessories and equipment. great emphasis in the coming year
took place. on maximising the public’s growing
A visual merchandising process has been
In another year of volatile trading undertaken to demarcate clearly in the awareness and enthusiasm for the
conditions the chain’s turnover grew by stores the lifestyle and performance 2010 FIFA World Cup™ and providing an
8,8%, but turnover in comparable stores areas and to identify the trail-running, optimal selection of products for players
was marginally lower by 0,4%. mountain-biking, outdoor and and supporters.

2010/07/27 4:48 PM
FOSCHINI GROUP ANNUAL REPORT 2010 - Page 62 OPERATIONAL REVIEW – SPORTS DIVISION CONTINUED
sports
division
There will be continued interaction with the stores even faster and thus improving and the division intends to open 31 new
the customer base through targeted efficiency and stock turn. stores. Of these, 20 will be Totalsports
local events, promotional initiatives stores, ten sportscene and one DueSouth
around the introduction of new products Prospects stores. Opportunities for further space
and the division’s own national event acquisitions in good locations are being
Trading conditions are expected to
sponsorships. These are all tools to gain pursued.
be difficult in the new financial year,
awareness in the market-place.
particularly the first half, with an
In the sportscene chain, following the expectation of an upturn towards the end
strategy review undertaken previously, of the year. In spite of these conditions
there will be ongoing action to keep the division expects to produce
the chain aligned with its fast-moving acceptable growth, with the 2010 FIFA
target youth market. Emphasis will again World Cup™ providing a welcome
be placed on building strength in the stimulus.
footwear category and in strengthening
the chain’s position in popular Good expansion opportunities have been
internationally branded products. Revised identified in several geographical regions
store layouts are being introduced,
with less emphasis than in the past
on maintaining uniformity between
stores. Non-uniformity saves costs and Store statistics
appears from market research to have Projection
no unfavourable effects on customer
perceptions and spending patterns. 2006 2007 2008 2009 2010 2011 2012
DueSouth will retain its existing Totalsports 97 106 112 134 148 170 180
objectives and its product ranges will be sportscene 79 86 90 105 114 124 130
supplemented by new products and new
categories of products. Sponsorship of DueSouth 14 16 19 25 29 30 34
the DueSouth Xterra Multisport event Total No. of stores 190 208 221 264 291 324 344
continues and includes a DueSouth
Franchise stores 1 1 2 2 –* – –
television programme.
Closures 2 – 3 2 – – –
The division will again participate actively
in the group’s supply chain initiative with Floor area (m²) 44 221 48 858 54 338 67 325 74 790 81 730 88 480
the objective of bringing products into * Now consolidated

2010/07/27 4:49 PM
JEWELLERY division
FOSCHINI GROUP ANNUAL REPORT 2010 - Page 64 OPERATIONAL REVIEW – JEWELLERY DIVISION
JEWELLERY
division
The leading player in the mass middle market
for jewellery and branded accessories.
POSITIONING Sterns as the No. 1 and No. 2 jewellery appropriate products and brands to
brands respectively in southern Africa. express their status. The American Swiss
The Foschini group Jewellery division is
the leading player in the mass middle In-house credit accounts for 60% of total brand is highly visible in shopping centres
market for jewellery and branded sales. and in the media, making its fashion
accessories. It has attained this position statements with confidence and flair.
The division strives continually to
by offering attractive and inviting retail differentiate the products it stocks in Sterns is a contemporary and classic
environments, extensive product ranges, order to offer real choice to customers. jeweller well known to the market for its
desirable brands and outstanding service. Merchandise is obtained from all parts of quality and welcoming service, offering
Measured by number of stores, American the world, including products designed beautiful and meaningful jewellery. The
Swiss Jewellers is the largest jewellery and manufactured locally for the Sterns brand has now been repositioned
chain in southern Africa, followed by southern African market, so ensuring that as a quality contemporary jeweller in
Sterns. American Swiss and Sterns have
there is ongoing innovation and trend- terms of merchandise, advertising and
each traded successfully for more than
setting. store design.
100 years and as a result have built up
large and loyal followings in the market- The American Swiss brand is positioned Matrix, the division’s sunglasses and
place. The AMPS survey of 2009 and the to appeal to the fashion-forward and cellphones chain, caters for the brand-
Sunday Times Annual Top Retailer Awards image-conscious customer, and offers savvy and image-conscious consumer
for 2009 confirm American Swiss and consumers in the growing middle market who aspires to designer labels.
2010 % change 2009

Turnover (R million) American Swiss 664,6 (1,6) 675,3
Matrix 37,1 (8,2) 40,4
Sterns 393,6 (4,1) 410,3
Total 1 095,3 (2,7) 1 126,0
Number of stores American Swiss 205 3,0 199
Matrix 22 15,8 19
Sterns 138 4,5 132
Total 365 4,3 350
Floor area (gross m ) 2
American Swiss 14 586 2,4 14 244
Matrix 652 9,8 594
Sterns 9 300 1,6 9 154
Total 24 538 2,3 23 992
Number of employees American Swiss 868 7,6 807
Matrix 63 12,5 56
Sterns 547 7,7 508
Total 1 478 7,8 1 371
Adrienne Kleinman

REVIEW OF THE YEAR

The division’s sales contracted by
2,7% for the year. In view of the global
economic crisis and the fact that the
OPERATIONAL REVIEW – JEWELLERY DIVISION CONTINUED
products on offer are mainly in the luxury

category, this result is neither surprising
nor unsatisfactory.
The marketing budget was realigned to
reflect the tightening of the economy
and to ensure that advertising spend
was focused on driving turnover while
nevertheless protecting the brands’
essence. Divisional expenses were well
controlled but additional promotional
activity took place.
In recognition of the needs of consumers
in the downturn, increased promotional
activity was undertaken across all three
brands in order to offer customers
additional value for their money. This
resulted in an increase in the mark-down
to sales ratio to 11,6% from 10,1% in the
previous year.
The Rand price of gold remained
relatively stable last year after a 40%
increase in the previous year. This made
it possible for the prices of most gold
products to be maintained at levels
prevailing in the previous year, while the
prices of certain lines were reduced in the
promotional drive mentioned above, with
notable benefits to customers.
Stock turn remained in line with prior
years at 1,7 times. When trading started
to slow down at the beginning of the
year the division focused on managing
the stock in order to ensure that closing
stock levels were below those of last year.
This created a strategically better starting
position for the next year than that
which prevailed in the past year.
The division opened 17 new stores in
the year under review (seven American
Swiss, seven Sterns, three Matrix). Two
underperforming stores were closed (one
American Swiss and one Sterns).

JEWELLERY
division
2006 2007 2008 2009 2010
% of sales* 10,0 9,4 9,9 10,1 11,6
* Based on latest selling price as opposed to original selling price used previously
The division has opened 43 new stores off-set by increased electricity costs. It positioned the division’s brands for
over the past two years, remaining is anticipated that the 2010 FIFA World market leadership in the future and the
confident about the future and its Cup™ events will generate positive next year will see a continuation and
prospects for continued expansion. In sentiment that will assist in lifting sales. refinement of this process. To this end,
the current tough economic climate the Inflation in jewellery costs is expected to the division is focusing on innovations in
additional space has naturally placed be low and this should help to drive unit products and marketing strategies.
pressure on trading densities, resulting in sales growth when it is borne in mind that
Three American Swiss concept stores
a reduction in trading density from the rising gold price of the previous few
R47 000 per square metre in the previous have now been opened and are trading
years, coinciding with a general economic
year to R45 000 in the 2010 year. well. The American Swiss concept store at
downturn, was the chief factor in bringing
the Canal Walk shopping centre won the
about contraction in unit sales.
STRATEGY Spectrum Award 2009 for Best Retailer
The division will also continue to rely in the Western Cape. This distinctive
The division expects a slow recovery
on the strength of each of the American shop design will be rolled out to major
in respect of durables especially luxury
Swiss, Sterns and Matrix brands in its shopping centres over time.
goods and therefore expects that trading
drive to continue growing their market
conditions in the new financial year will Sterns launched a new concept store at
shares.
continue to be tough. Reduced interest the beginning of the 2009 year. While
rates will no doubt have a positive impact The brand alignment process undertaken it improves greatly on the previous
on consumers, but this will partially be over the past years has strategically generation of stores and has been

OPERATIONAL REVIEW – JEWELLERY DIVISION CONTINUED
well accepted by customers, there is

Store statistics
opportunity for further refinement of the
concept. When finalised it will serve as Projection
the basis for all new stores in the Sterns 2006 2007 2008 2009 2010 2011 2012
chain.
American Swiss 179 181 187 199 205 212 215
The Jewellery division considers that Sterns 115 121 122 132 138 143 150
customer service is a key differentiator.
Matrix 14 14 19 19 22 24 26
Accordingly, the division is continuing to
improve the training programmes used Total No. of stores 308 316 328 350 365 379 391
in stores and at the group’s head office Closures 3 4 7 4 2 2 2
in order to ensure that all staff members
Floor area (m )
2
21 580 22 029 22 519 23 992 24 538 25 308 26 018
are aligned with the division’s customer
focus and its core values. Further details ensuring adherence to ethical, labour and
on the group’s human resource activities environmental performance standards.
– including employment equity, skills This should result in improved decision-
development, and occupational health making and operational efficiency. The
and safety – are provided in the Human division complies with the requirements
Resources review. of the Kimberley Process, aimed at
Supply chain management continues to ensuring that all diamonds have been
be a key focus within the group and the purchased from legitimate sources
division has launched several initiatives not involved in funding of conflict, in
that will, over the next few years, build compliance with the United Nations
a supplier pipeline that has greater Resolutions. Further details on the
flexibility and shorter lead times than nature of the division’s supply chain
have prevailed in the past, while also management and auditing activities are

JEWELLERY
division
provided in the Supply Chain and Group
Merchandise Procurement reviews.
The division’s store location strategy
includes the continuous monitoring
of performance trends and where
economic factors so dictate, closures or
consolidation will proceed. Locations
in new and existing shopping centres
where the division’s stores are under-
represented have been identified, and
new stores will be opened in prime
positions. Great care is taken in ensuring
that new stores are appropriately sized.
A measured view of expansion is taken,
in line with the core strategy of seeking
long-term growth in sales and profit.
PROSPECTS
As has been indicated above, the division
expects that trading in the next year will
be subdued, in line with conditions in the
broader economy, but it is confident that
the strength of its brands, the positive
cash flow of the group and the expertise
of staff members will enable the division
to grow its turnover and market share,
with benefits to overall profitability.

2010/07/27 4:49 PM
@home
FOSCHINI GROUP ANNUAL REPORT 2010 - Page 70 OPERATIONAL REVIEW – @HOME
@home
Sells a comprehensive range of homewares and furniture.
Positioning Bahrain with the Al Tayer Group LLC and floor area. A further store has been added
there are now seven franchised stores in in the new year, bringing the total in the
At the year-end the @home division
this chain. @homelivingspace format to 13.
operated 78 stores throughout the major
shopping centres in South Africa. They During the year various measures
sell a comprehensive range of homewares Review of the year were implemented to reduce the
and furniture that is aimed at the Turnover in the @home division grew by environmental footprint and increase
LSM 8 – 10 groups. 15,7% during the past year, spurred by the energy efficiency of stores. Details
the opening of seven stores during the on these initiatives are provided in the
Over the past few years the division has year. Of the new stores, three were in the environmental performance review in the
undertaken considerable expansion in the @homelivingspace format, while two services section.
number of its @homelivingspace stores. @home stores were relocated to
These comprise larger format stores enlarged premises and converted to The recession prevailing in the broader
providing a full range of homewares @homelivingspace stores. economy affected trading conditions in
that includes a wide selection of the division, particularly as homewares
contemporary furniture. The new @homelivingspace stores and furniture are not perceived as
are located in Century City Boulevard essential purchases. There was also some
At the year-end there were 66 @home (Cape Town), The Grove and Park View planned cannibalisation of revenue
stores and 12 @homelivingspace stores. (Pretoria), Gateway (Durban) and The because of the roll-out of the larger
The division has a franchise arrangement Glen (Johannesburg South). They are each @homelivingspace stores. This
in place in the United Arab Emirates and approximately 2 000 square metres in combination of factors led to a decline
2010 % change 2009

Turnover (R million) 587,8 15,7 508,1
Floor area (gross m ) 2
49 587 27,9 38 766
Number of employees 955 29,1 740
China, China,
India, Brazil, India, Brazil,
Most significant countries from which Vietnam, Vietnam,
merchandise is imported Europe Europe
Excludes seven franchised stores in Dubai and Bahrain
Howard Godfrey

OPERATIONAL REVIEW – @HOME CONTINUED
of 6,3% in turnover on a comparable

store basis but the overall turnover of the
division, enlarged by the additional stores, 2006 2007 2008 2009 2010
grew by 15,7%. Mark-down value (Rm) 27,1 39,3 47,3 46,5 72,4
Because of the pressure experienced % of sales 7,5 8,3 9,0 8,0 10,7
by the homewares sector in the recent
recessionary times, special measures were
The volume of marked down sales human resource activities – including
taken to sharpen cost controls and stock
levels were kept in line with turnover. was inevitably higher because of the employment equity, skills development,
prevailing recessionary conditions and the and occupational health and safety – are
As part of ongoing efforts to ensure opportunity was taken to clear lines of provided in the Human Resources review.
responsible supply chain management
stock unsuitable for future trading.
for all its wooden outdoor furniture, the Strategy
division endeavours to only source wood Trading density for the past year in
from factories that are Forest Stewardship comparable stores was R16 200 per The @home division will open fewer
Council (FSC) certified, especially where stores in the next year. Of the five
square metre.
teak or balua is concerned. An important contemplated, four will be @home stores
development this year has been the The franchised chain in the United Arab and one an @homelivingspace store,
introduction of a revised supplier auditing Emirates and Bahrain, now extending to the latter to be opened in the Northern
process aimed at ensuring that all seven stores, has also been affected by Province. Because of the quick roll-out of
contractual obligations are being met, the global recession, but it is clear that stores over the last few years, the next
including all legal, ethical, environmental, the @home concept and brand have been year will be a year of consolidation in
labour, and health and safety compliance. well received in the region. order to improve efficiencies and increase
Further details on the nature of the trading densities.
group’s supply chain management and Investing in talent development is an
auditing activities are provided in the ongoing focus to ensure a supply of Because of the difficult economic times
Supply Chain and Group Merchandise talent and skills to meet our business the division is making a thorough review
Procurement reviews. requirements. Details on the group’s of its assortment of stock to ensure its

@home
Store statistics Projection

2006 2007 2008 2009 2010 2011 2012
@home 39 49 58 65 66 70 74
@homelivingspace 2 2 3 7 12 13 13
Total No. of stores 41 51 61 72 78 83 87
Franchise stores – – 2 6 7 10 12
Closures – – – – 1 – –
Floor area (m )2
18 624 21 906 27 605 38 766 49 587 53 187 54 787
attractiveness to customers and to ensure has remained strong, giving the division supply chain initiative, where good
that they receive fair value and good the opportunity to bring further ranges progress has already been made.
fashion content when making purchases of attractive and affordable homewares Notwithstanding the poor economy in
at the division’s stores. This process will to the shop floors. These are seen as Dubai, the division’s franchise partner
engage the division continuously in the positive signs for the next year. The is nonetheless planning to expand its
next year, when the watchwords of the limited programme of store openings in chain of @home stores further across the
division will be the retention of margins the next year will allow the division to region.
and tight control of stocks and costs.
retain its focus on maintaining growth in
areas where the division is already well
Prospects
established.
While the interest rate cycle is now at
its lowest level for many years, growth Emphasis will also be placed on achieving
in consumer spending in the homewares maximum efficiency for the division
market is expected to be slow. The Rand through its participation in the group’s

OVERVIEW
Effort was divided in the past year
between consolidation of the process
changes made during the past two years
and preparation for another wave of
OPERATIONAL REVIEW – SUPPLY CHAIN
process changes. All this activity has the

ultimate objective of achieving improved
stock turn and in order to bring this about,
the group is striving to create a world-class
model of supply chain management. In the
work done so far fundamental aspects of
the business as it had traditionally been
conducted have already been challenged
and, where necessary, changed.
Measurable progress in this ambitious
project is shown by the fact that the
volume of stock held in the group’s eight
distribution centres (DCs) at the year-end
was 64% lower than at the end of the
previous year. This was almost entirely
the result of improvements in process
efficiencies.
Various initiatives were employed to
achieve this reduction. Among them
were improving the rate at which stock
is processed through the DCs, changing
planning cycles to accommodate shorter
throughput time and implementing a
conformance programme to ensure that
suppliers deliver merchandise when and
where it is required. The beneficial results
which are to be brought about in the
longer term include a more efficiently
co-ordinated order management cycle
and the ability to react with speed and
precision to changes in buying patterns,
which are in effect dictated by changes
in fashion. The final result, to be achieved
in progressive steps over a number of
years, is intended to be substantial
improvements in rates of stock turn and
correspondingly increased levels of profit.

SUPPLY
CHAIN
GROUP SUPPLY CHAIN This increasingly rigorous assessment replenishment system is in the process of
INITIATIVE of both potential and existing suppliers being procured.
will yield greater reliability, improved
Good progress has been made in the With the roll-out of the new warehouse
risk management and better-informed
group’s four original projects and many management system, part orders can
sourcing decisions.
of the project elements have been fully now be allocated selectively with a view
adopted by the trading divisions. Every Pipeline to maximising allocation efficiency. This
trading division has integrated the supply will ensure that the distribution of each
The group is strategically well positioned order aligns more closely to consumer
chain strategies into its own corporate
to take advantage of local sourcing demand. The Markham and exact!
strategies and reports on progress on a
through vertical integration of its divisions are piloting this process and
monthly basis. manufacturing wing, the TFGA division. initial indications are that there have
The original four projects are as follows: The operational capability of TFGA been improvements in sell-off rates.
has been further enhanced and a
Supplier relationship comprehensive measurement system has
management been firmly established.
Reliability of the supply of merchandise is While pre-season lead times have been
critical in achieving all of the supply chain further reduced by 10% in the past year
objectives. Numerous process changes and now stand at 130 days, the focus has
have been implemented to bring about also moved towards in-season trading
desired changes in behaviour: on a commercial basis. It is believed that
both of these initiatives are critical in
• A more rigorous sign-on process better responding to consumer demand.
is now in place for suppliers.
All potential new suppliers are The group’s fabric management process
directed to the Group Merchandise has also been substantially enhanced
Procurement division, which screens through tighter controls. The structure
them and recommends action to the has been reviewed and supplier
internal buying division. measurement systems have been put
in place. Further gains are envisaged in
• An audit process for suppliers has decoupling strategic fabric procurement
been piloted with five of the group’s from garment styling, to support in-
top suppliers. Details of this process season trading. Targets are being reviewed
will be finalised in the next year. and reset for March 2011 forward.
• An in-house quality measurement
system has been developed and has
Lead time
been integrated with the supplier This project focuses on the logistical
scorecard. This system measures processes between supply and delivery to
adherence by the supplier to the store. Lead-time gains already achieved
group’s performance standards have been consistently maintained
– including ethical, labour and over the past 12 months and the main
environmental issues – and enables elements are fully operational and
better reports to be provided by the are entrenched in standard operating
quality assurance team. procedures. This project will now focus
on only those specific elements where
• Reporting on delivery conformance further time can be saved.
and on cost recovery has been in
place for the past six months and Replenishment and holdback
has yielded a 10% improvement in
The clothing divisions have continued
logistical conformance.
to manage the process of obtaining
• A supplier scorecard has been piloted replenishment items by the use of
and will be rolled out to all local and technology which limits opportunities to
international suppliers from maximise the benefit of replenishment
July 2010. programmes. A new forecasting and
Martin Mendelsohn

2010/07/27 4:50 PM
FOSCHINI GROUP ANNUAL REPORT 2010 - Page 76 OPERATIONAL REVIEW – TFG APPAREL SUPPLY COMPANY
TFG APPAREL SUPPLY
COMPANY
underwent a major restructuring in the second half of the past year.
The TFG Apparel Supply Company control over and responsibility for their
(TFGA), a division which historically own designs of merchandise. This move
performed a number of essential services will allow them to react faster than
for the trading divisions in sourcing before to the market’s needs in terms of
and arranging the supply of garments, design and to permit strategic ordering
underwent a major restructuring in the decisions to be made later than in the
second half of the past year. past, so increasing their relevance. The
It has now been split into two divisions. latter factor is particularly important in
allowing these divisions to make style
The first retains the TFGA name and,
changes and to obtain replenishment
in a modified form, will focus on co-
stock in the season in which garments
ordinating the manufacturing needs of
are sold.
the trading companies in order to enable
them to achieve faster turnaround of The second part of the old TFGA is
orders at better prices and so enhance now known as the Group Merchandise
their market positions in the highly Procurement (GMP) division, catering
competitive fashion industry. for product procurement for the group,
The front-end design sections which and for shipping and quality assurance.
are closely linked to the Foschini and A separate report on the operations of
exact! divisions have been moved into the GMP division follows on immediately
these divisions to allow them to have after this review.

GROUP MERCHANDISE
PROCUREMENT
POSITIONING distant. Investors are also beginning to reliability, speed, quality, value and
exert pressure aimed at ensuring fair flexibility, while also ensuring the
The group’s procurement base has
labour practices in the retail supply chain. maintenance of appropriate ethical,
changed fundamentally over the
labour and environmental standards, in
last few years both domestically and South Africa is thus located firmly within
keeping with the needs of an efficient
internationally, and will continue to the global trading environment, but also
OPERATIONAL REVIEW – GROUP MERCHANDISE PROCUREMENT
and responsible fast fashion retail

change in an evolutionary manner. These contends with economic factors that are
organisation.
changes represent the group’s responses purely indigenous.
to developments in the broader economy To meet these objectives the division is
Sensing that modern trading conditions
of South Africa and further afield and in the process of formalising procedures
called for extraordinary responses, the
its insights into better ways of doing and norms for supplier assessment,
group entered into its supply chain
business. approval procedures and performance
initiative approximately two years ago,
measurement in order to maximise
Within the broader economy there is aimed at leading it to become a world-
best-practice methodologies that can be
increasing cost pressure on retailers and class retailing organisation with a highly
shared across the group’s divisions.
increasing competitiveness within the efficient system from start to finish
retail world stemming ultimately from of procuring stock and placing it in its
easy access to information and, with it, stores.
REVIEW OF THE YEAR
the services of suppliers of all types of A start has been made on developing a
As one of many steps in this process process of continuous analysis of global
merchandise who may be geographically
the group recognises that it now needs procurement trends. This has already led
a division dedicated to highly efficient to the opening up of opportunities for
procurement of merchandise and this potential new suppliers and geographical
led in the latter half of the 2010 year to regions in which to seek suppliers.
the creation of the Group Merchandise
Procurement division. To some extent The test phase is under way of a set
the new division was spun out of the of group merchandise policies and
Sourcing department of the old TFGA procedures for both formerly approved
division and will now, with a new vision and new suppliers. It incorporates a new
and a new set of controls, continue with and updated group quality assurance and
those functions. There are also new quality control system and process.
functions and goals which are aligned The division has a unique value
with the group’s overall strategies.
proposition through the implementation
To set the new division on its way, a well- of measurement processes to facilitate
structured operational team with clearly supplier development, the provision of
defined roles and responsibilities has technical support where needed and,
been assembled. in extreme cases, the rehabilitation of
suppliers after lapses have occurred.
This new division is responsible for the
strategic development of merchandise The division aims to enhance the level
procurement from both domestic and of skill of its personnel and to develop
international suppliers. This overall and share best-practice concepts with all
task breaks down into a number of stakeholders, both internal and external.
components including the establishment
One of the division’s responsibilities
and enforcement of supplier conformance
is to ensure that all applicable
norms, measuring supplier performance
contractual obligations are being met
and establishing and recording scorecards,
and this includes compliance with all
applying group quality assurance
applicable legal, ethical, environmental,
standards, overseeing group shipping and
employment, and health and safety rules.
assuring compliance with all local and
A revised supplier auditing system has
international legislation.
commenced and a new scorecard will be
The division aims to deliver healthy rolled out to the group’s suppliers in the
supplier relationships in terms of new year.
Selwyn Eagle

High degree of competence and expertise
Who are our Do they meet our

suppliers? requirements?
(Sign on Scorecard) Supplier selection (Scorecard)
Effective communication
Clearly defined outputs

and development
Finance Shipping
Standardisation
Quality Conformance
HR
management management
What can they How are they

do better? doing?
(Rehabilitation)
Accountability
Through the Shipping department and a comprehensive and fully documented

partnerships with service providers, database, which is used to map, record
the division manages all of the group’s and report on all suppliers in terms of
payments for freight, international their strengths and weaknesses. This
logistics, foreign exchange and includes implementing a formalised
merchandise. standard supplier take-on process to
ensure consistency throughout the group.
By implementing a number of supply
chain initiatives the division has been A further aim in the next year is to
able to reduce transit times in order to implement upstream quality assurance
facilitate speed to the market-place. processes both locally and internationally,
The diagram above illustrates the basic covering all merchandise categories in
structure and functions of the division. which the group trades.
An assessment is being made of a fully
STRATEGY integrated foreign exchange management
The management team has identified and logistics visibility system, which the
key strategic objectives for the near and division expects to acquire and bring into
more distant future and these are being use during the course of the next year.
disseminated throughout the division and This will provide the group with updated
the group. currency and logistics positions, enabling
These objectives are built on the pillars better and faster decisions to be made.
of profit, people, process and suppliers, The division has played a pivotal role
underpinned by effective communication. in the successful introduction of
@home franchise stores in the United
PROSPECTS Arab Emirates and will play a similar role
The division’s immediate task is to ensure elsewhere as the group expands further
that the group acquires and maintains into Africa.

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2010/07/27 4:46 PM

2010 % change 2009

T4IB02815-Foschini AR Com.indd 39 2010/07/27 4:46 PM

The adverse economic conditions

creditable turnover growth of 11,0% in

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Cellular products Foschini

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fashíonexpress donna-claire fashionable products that will appeal

T4IB02815-Foschini AR Com.indd 42 2010/07/27 4:47 PM

T4IB02815-Foschini AR Com.indd 43 2010/07/27 4:47 PM

T4IB02815-Foschini AR Com.indd 45 2010/07/27 4:47 PM

POSITIONING REVIEW OF THE YEAR Performance in cellphones and other

2010 % change 2009

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Repositioning of the Markham brand,

of the division’s smaller stores, which

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2010 % change 2009

A breakdown of sales by product category

High streets 28,5 25,0 Menswear 20%

Rural areas 23,7 26,7 Footwear (for men,

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other types of apparel, as adult shoppers

T4IB02815-Foschini AR Com.indd 54 2010/07/27 4:48 PM

A corporate social responsibility project, Closures – 1 1 – 3 3 1

Strategy On the employment front, it remains an

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2010 % change 2009

T4IB02815-Foschini AR Com.indd 57 2010/07/27 4:48 PM

DueSouth, now in its sixth year of

to their lifestyle. The target market

REVIEW OF THE YEAR

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T4IB02815-Foschini AR Com.indd 59 2010/07/27 4:48 PM

Totalsports products by the introduction of new sportscene

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2010 % change 2009

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REVIEW OF THE YEAR

products on offer are mainly in the luxury

T4IB02815-Foschini AR Com.indd 66 2010/07/27 4:49 PM

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well accepted by customers, there is

T4IB02815-Foschini AR Com.indd 68 2010/07/27 4:49 PM

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2010 % change 2009

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of 6,3% in turnover on a comparable

T4IB02815-Foschini AR Com.indd 72 2010/07/27 4:49 PM

Store statistics Projection

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process changes. All this activity has the

T4IB02815-Foschini AR Com.indd 74 2010/07/27 4:50 PM

T4IB02815-Foschini AR Com.indd 75 2010/07/27 4:50 PM

T4IB02815-Foschini AR Com.indd 77 2010/07/27 4:50 PM

and responsible fast fashion retail

T4IB02815-Foschini AR Com.indd 78 2010/07/27 4:50 PM

Who are our Do they meet our