SUREN NAIDOO: We are staying in the retail sector now, but we are chatting to the group that owns the Edgars chain of stores, Durban-based Retailability. We have CEO Norman Drieselmann on the line, who is going to tell us how Edgars is doing after Retailability acquired the chain during Covid through a business rescue process. Norman, welcome to the SAfm Market Update.
NORMAN DRIESELMANN: Thanks very much. Great to be here.
SUREN NAIDOO: Norman, how has the Edgars acquisition been for Retailability? Has Edgars as a business been turned around, and is it profitable?
NORMAN DRIESELMANN: It’s been a good acquisition for Retailability as a group. We are very encouraged on the performance of our turnaround. The business restructures progressed well with significant cost savings as we’ve looked to restructure a lot of the fundamentals inside the business. And that’s converted us to a really good low-cost operating model. It’s from that position that we’ve been able to then put a lot of energy into the product and store operations. That has set us up nicely.
We’ve seen a significant swing from a rather substantial loss-making operation to a profit operation over the last financial year-ending. We are very happy with the progress and are well on track with our internal targets.
SUREN NAIDOO: Now, just as a follow-on to that, the restructure, a lot of it, was happening before Retailability took over. Refresh my memory – when exactly did it acquire the business? I know Retailability is an unlisted private retail group, so you never really share how much you paid for it. But during Covid the restructure also involved, for example, having one consolidated head office in Durban with Retailability, for example. What were some of the other aspects to streamline the business operations?
NORMAN DRIESELMANN: We took the business over in September 2020 out of business rescue. The restructuring included things like rent costs, re-looking at head office structures and eliminating all waste from the business. At the same time we really try to unlock a lot of synergies between our group, the existing Retailability group and the Edgars format – not just on the back end around IT systems, but also on the front end where we found we had some product opportunities that we could leverage inside the Edgars box that we took. It’s a combination of unlocking those synergies and bringing a more entrepreneurial ethos into how Edgars operated that allowed us to unlock both savings and top-line performance.
SUREN NAIDOO: Who is Retailability, again? What are its other store brands? And maybe you want to highlight the scale of the business, both in terms of your other brands and how many Edgars stores, for example, you now operate.
NORMAN DRIESELMANN: Sure. Retailability is a retail group. We own and operate four formats: Edgars, Legit, Beaver Canoe stores [which are] under the process of being rebranded Swagga, and our Style format. There are 586 stores that operate across southern Africa, trading predominantly in Africa but we have significant footprints in Namibia, Botswana, Eswatini and Lesotho.
SUREN NAIDOO: And those 500-plus stores include your Edgars stores?
NORMAN DRIESELMANN: Yes. That includes the 133 Edgars stores that we trade through here.
SUREN NAIDOO: Going back to Edgars, that’s your biggest chain now – or I assume it’s your biggest chain – considering it’s somewhat of a department store still. How were Black Friday sales, and what are your expectations for the festive season trade?
NORMAN DRIESELMANN: Black Friday was good for us. We were pleased. We managed to hit our targets on the Friday. We expected that the bulk of the sales would come through around that Black Friday weekend, and we focused our energy on that Thursday to Monday period. Those five days definitely proved to be the biggest trading days for us through that November period. So we had a strong Black Friday, and then we expect the usual low post-Black Friday, and then a nice pickup leading it to peak in the holiday festive season.
SUREN NAIDOO: On Edgars now, I see stock levels are up. The stores are looking better when you walk into some of the stores, which is a good sign. What else has Edgars been up to, to get back on track? I also see, for example, it’s back online and it has reintroduced homeware. One other thing that piqued my interest is that Edgars even sells Xboxes online now.
NORMAN DRIESELMANN: Yes, e-commerce is always finding new ways to list new products and expose them to quite a loyal online customer base. It has been exciting for them to drive sales. We’ve been doing a lot. We’ve stayed very disciplined, however, as part of the Edgars recovery. A key part of our strategy was to put more value in front of the customer. Our mission is to give great value every day to help the customers look and feel great. We are doing that by investing in private-label merchandise authenticated through the brands, and that private-level strategy has delivered fruit for us. We put deflation into our business to get our price points more aligned to where the South African consumers find themselves. And then we’ve done initiatives like bringing pages…… now. So pay just now, buy-now-pay-later products into our stores, and that’s proved very successful for us. We’ve relaunched our Thank U programme. We’ve got a 12 million customer base inside that Thank U programme, and we are starting to unlock value in that arena.
All these things have allowed us to have a half-year performance, if we look at April through to September, of just over 10% comp sales growth, and we are very encouraged by that. Our GP growth is ahead of sales, which is in line with our forecast plans. So we feel we are in a good space and the journey to recovery is well on track.
SUREN NAIDOO: With regard to Retailability as a group, is it still pretty much focused on building Edgars as a brand, or is it perhaps looking at any further acquisitions?
NORMAN DRIESELMANN: I think where we find ourselves today we are still very much focused on locking and unlocking all the value behind Edgars. That doesn’t say that there’s not more opportunity for us in the future, but it gives us a big transaction for Retailability and we want to make sure that we fully unlock all the potential inside that business. So we are a little bit focused there, but our Style and Legit formats continue to be high-growth vehicles for us and we are going to be opening quite a few stores in that space.
And then we’ve got a project next year that we are very excited about. Not ready for too much more detail, but I think it’s another exciting way to add value to Retailability.
SUREN NAIDOO: Fantastic. Lastly, before you go, I have to ask, Norman. The group is Durban-based. It was one of the many retailers that were affected by the July riots last year. But Retailability was a little more affected with its DC [distribution centre] also burnt in a fire. Has the group recovered on that front? I see online it says that your head office is based out of part of the Unilever building now.
NORMAN DRIESELMANN: We have recovered. It was, as you can imagine, rather traumatic for both staff and the business. With the DC, ironically we had actually a week prior to being burnt just moved into it, to a brand new facility that we moved into. But yes, we’ve recovered. We are operating through another distribution centre elsewhere in Durban. Next year we move to what we are now calling our ‘new new’ DC, and we are very excited about that initiative as the additional space will unlock a lot of supply-chain opportunity for Retailability as a group.
Yes, we’ve gone from Covid to riots to floods. It’s been an interesting time here in Durban, but my staff and I remain incredibly resilient, and I’m very proud of how all the teams have managed through this.
SUREN NAIDOO: Norman, thanks so much for your time. We’ll have to leave it there. That was Norman Drieselmann, CEO of Retailability, the group that owns Edgars.