Western Cape Business News

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RETAIL: Another family-owned retailer struggling


Recent Western Cape Business News

SUPERMARKET giant, Pick ‘n Pay, is not the only family-owned retail enterprise in Cape Town that is suffering the vagaries of a sometimes fickle consumer segment.

Fashion retailer, Rex Trueform, which has long been under the control of the Shub family, put in a drab performance for the half-year to end December with revenue down 10% to R257m.

What was more worrying is that the operating margin at Rextru – which peddles its garb through the well-known Queenspark chain – was shredded from over 53% last year to 47%. This left gross profits down 21% at R121m.

Even though Rextru managed to restrain the increase in operating expenses to less than 1%, the company slipped R21m into the red at operating profit level. This must rank as one of the shabbiest performances by the perennially profitable Rextru in a long time.

In rather terse commentary that accompanied the interim numbers, Rextru CEO Catherine Radowsky said the weaker rand negatively impacted the gross profit margin. She added that the effects of the movement in the exchange rate could not be passed on to consumers under the current market conditions.

Some observers might wonder whether the family’s conservative strategies might be hampering the development of Queenspark, which fared badly against its larger peers like Foschini, Truworths and Mr Price in the interim period.

Then again, the conservative family ownership has meant the hoarding of a substantial cash pile of R137m to tide the company through the tougher times.

And the cash pile is reassuring since the outlook for the second half of the year is not exactly bright either. Radowsky predicted a continued reduction in both sales and profitability in the second half of the financial year.

She said the company was implementing various strategic initiatives, which should have a positive

impact on the business in the medium term.

In the meantime, Rextru is diversifying its income stream with property rentals by re-developing its Salt River property (now called the Rex Trueform Office Park development.)

Radowsky disclosed that a further R20m would be spent on the project in the months ahead, a development which will hopefully see a marked boost to the rental line.

Rental income earned by Rextru in the six month trading period was less than R700,000. In the year to end June 2012 the company earned almost R1,6m from rentals.

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