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Italtile relying on vertical integration to trade through tougher environment

Italtile says new stores would continue to be rolled out, some stores revamped and capacity of the supply chain and manufacturing will continue to be enhanced

26 August 2022
Italtile will focus on factors under its control and mitigate risks as much as it can so that it can trade through the choppy macroeconomic and operational environment outlook for 2023, CEO Lance Foxcroft said yesterday.

The bathware, tiles and other home finishing products group yesterday released results for the year to June 30 where it did well to increase headline earnings a share to 152.1 6 cents from 140.1 cents, off the back of a very high earnings base in 2021 when home improvement boomed through the pandemic. The dividend increased to 61 cents from 56 cents.

Foxcroft said in a telephone interview yesterday that the outlook for discretionary consumer spending was cloudy because of the uncertain inflation and interest rate outlook. He said consumer spending had shifted from home improvement to other recreational and discretionary purchases as pandemic-related restrictions were lifted and various sectors reopened. Lower customer footfall and a decline in demand was widespread across the construction industry.

Supply chain disruptions caused instability in supply and pricing for the group for much of the year, while significant increases in inflation in most markets drove up input and other operating costs, and reduced discretionary spend, he said.

The group’s retail brands across 211 stores are CTM, Italtile Retail, TopT and U-Light.

He said energy security and consumption would be top of mind for their management teams. “Global pricing uncertainties, capacity constraints and reducing our carbon footprint are all issues we will be focused on,” he said. The group is one of the biggest gas users in the country, and subsequent to year end, it was still awaiting an announcement from Nersa and Sasol regarding a potentially large increase in pipeline gas prices – a big increase will likely impact the affordability of product as well as the group’s manufacturing margins.

Foxcroft said, for example, one initiative being explored for the medium term was bringing in a biogas partner to provide gas to its factories, while the introduction of solar energy at its stores and other energy savings measures were ongoing projects. Ten new stores were opened in the past year and the revamp of 15 stores were advanced.

Some R800 million of capital expenditure included the commissioning of the upgraded Samca+ tile factory in Hammanskraal; a one-stop retail node in Boksburg, Gauteng, which showcases Italtile Retail, CTM and EasyLife Kitchens stores; construction of Betta Sanitaryware’s 17 000 pallet warehouse; and the construction of Ezee Tile’s new flagship factory in Gauteng.

Foxcroft said growth levers within management control included improving product ranges and retail disciplines, and training and development of staff and a strong management 7 team. New stores would continue to be rolled out, some stores revamped and capacity of the supply chain and manufacturing would continue to be enhanced, he said.

“On balance, we are satisfied the goals we identified at the end of the 2021 financial year have been accomplished; in line with our high-performance culture, we will continue to strive to outperform the targets we set for the year ahead.

” A decision to increase investment in critical stock and raw materials to mitigate against supply and pricing volatility had raised inventory levels in the short term but was outweighed by positive customer response to stock availability in the stores. Ceramic improved its offerings with new product from the upgraded Samca+ factory. In addition, the EcoTec tile ranges, which use fewer resources to produce, were launched at all of the factories.


Sit, stay: Woolworths enters the pet care business

Georgina Crouth 31 October 2023

The retailer has bought a 93.5% stake in Absolute Pets, in bid to become ‘end-to-end pet care destination of choice’

People love their “fur babies” and judging by Woolworths’ latest acquisition, the retailer is banking on our attachment to our best friends. Woolworths has announced that it is buying 93.45% of the shares in privately owned pet retailer Absolute Pets from Sanlam Private Equity and Absolute Pets management.

The remaining management-retained shareholding will be acquired by Woolworths over an unspecified period, post the completion of the transaction, the retailer announced. Established in 2005, Absolute Pets is a leading specialist pet care retailer, with a loyal customer base and comprehensive product offering. The business has more than 150 stores countrywide, including online, pet spas and pet services.

In May 2021, Sanlam Private Equity bought a majority stake in Absolute Pets, which had planned to own 200 stores by 2026, creating more than 300 direct and 950 indirect jobs, and to grow its e-commerce channel. The Woolworths acquisition will help Absolute 8 Pets speed up its growth and allow Woolies to become the “end-to-end pet care destination of choice”.

This acquisition also pits it against Shoprite-Checkers, which has opened 67 premium pet stores since 2021. Woolworths has already expanded its pet product range inside its stores, with gourmet food, toys, grooming products and treats.

In August, Woolworths CEO Roy Bagattini told Daily Maverick that customers loved the retailer’s fresh offerings, which is why Woolworths would be doubling down on its food business by opening more coffee shops and standalone food stores, as well as liquor and pet outlets.

South Africa’s pet segment is currently worth more than R8-billion and is expected to grow to double digits over the next few years, as people consider pets as integral to their families. Data from Statista shows the pet food market in South Africa is worth $0.45- billion – or R8.48-billion – in 2023. The market is expected to grow annually by 13.30% from 2023–2028. Compared with global figures, most revenue is generated in the US ($57 380 million this year).

Stephen Warner, Absolute Pets CEO, and his current management team will continue to operate and lead the business under the Absolute Pets brand, the companies said. Pet care has substantial growth potential and an increasingly important category for Woolworths customers, the retailer said.

“Absolute Pets has a complementary brand positioning, a well-established market presence, and is led by a strong management team. The acquisition of Absolute Pets will accelerate Woolworths’ pet strategy by bringing together two strategically aligned businesses and positioning the group well to become the end-to-end pet care destination of choice, in South Africa.”

Bagattini added that Absolute Pets and Woolies were a natural fit. “Both have a strong commitment to excellence and quality. The Absolute Pets brand has earned the trust of pet owners across South Africa, and I am truly excited by the opportunities our partnership brings to leverage our joint strengths and expertise to provide even more customers with the best overall pet service and experience in the market.”

Warner said the company was delighted to be joining forces with a brand like Woolworths, “whose vision and values are so closely aligned with our own. We look forward to 9 embarking on this journey of growth and collaboration together, as we continue to enrich the lives of pets and their loving owners”.

Market researcher Euromonitor International has reported that there are 9.1 million pet dogs in South Africa. The State of Pet Homelessness Index, published in June last year, estimates there are about 14.9 million dogs and cats in South Africa, with 4.1 million strays.

SA scored four out of 10 according to the index, compiled by pet-food manufacturer Mars Petcare, which measured 10 countries’ efforts to deal with dogs and cats which live on the street, are considered strays, or live in shelters.

2.3 Evaluate the strategy Woolworths is pursuing. (Article Four). (15)

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