A week from hell, is how 6 to 13 December 2017 will be remembered by Tekkie Town management and former owners … and the many Steinhoff and Steinhoff Africa Retail (STAR) shareholders and employees. “The Steinhoff developments should have no impact on our business because STAR is not implicated in any of the accusations,” Tekkie Town founder Braam van Huyssteen responded on the morning of 6 December.
That was soon after the resignation of Steinhoff International CEO Markus Jooste and the announcement that the auditors would not sign one of the world’s biggest retailers’ 2017 financial statements, created a Steinhoff share selling frenzy. STAR CEO Ben la Grange (also Steinhoff International CFO) resigned to focus on his Steinhoff financial role and was replaced by Leon Lourens.
Shareholders clearly did not agree with Van Huyssteen … even though Steinhoff International is the majority shareholder in STAR with 78% shares. Soon after Van Huyssteen’s response the shareholder blows started falling – STAR was not hit as hard as Steinhoff International, but it was (and is) clearly punished by association. Especially, following inflammatory announcements that Steinhoff’s 2016 financial statements will be re-examined.
On 1 December 2017, when STAR presented its 2017 financial statements to shareholders, shares closed on an all-time high of R25.71 – nearly 20% higher than the closing price on the day of its listing on 20 September.
By December 5 – the day before the bloodletting started – STAR shares were still valued, closing at R24.16. On Wednesday 13 December – a week after the disastrous announcement – STAR shares closed 35% down at R15.75.
Shareholders clearly approved of the 13.2% pro forma revenue growth reported by the company on December 1.
While the 1.4% pro forma revenue growth reported by the Speciality Retail division (which includes Tekkie Town) was not spectacular, it can be considered satisfactory in the current very tough trading conditions. In this division, Fashion and Footwear, headed by former Tekkie Town CEO Bernard Mostert, reported revenue of 3.9-bn, which is 27% of the division’s total revenue. DIY, G2 (Incredible Connection and Hi-Fi Corp) and Bedding also form part of the Speciality Retail division.
This division, however, contributed only 25% of the company’s R58.6-bn pro forma revenue for 2017 – the bulk coming from Discount and Value, dominated by Pep and Ackermans, with 85% contribution to this sector’s revenue.
When Tekkie Town was officially acquired by Steinhoff in February 2017, it represented one of the biggest success stories in the Southern African athletic footwear retail industry. In a mere 18 years, Van Huyssteen had grown the company from 1 to 308 stores. By mid-March, it had 330 stores. When it became part of STAR, Van Huyssteen was appointed chairman of the property committee, responsible for about 5 000 stores. Apart from Tekkie Town, Mostert is also responsible for Shoe City, Dunns, Refinery, John Craig etc. as head of STAR Speciality Retail’s Fashion and Footwear division.
Tekkie Town has officially been part of Steinhoff for the last 9 months of the 2017 financial year. When the sale to Steinhoff was finalised on 1 February 2017, Markus Jooste and Steinhoff COO Danie van der Merwe joined Van Huyssteen, Mostert and COO Dawie van Niekerk on the Tekkie Town Board. The retailer subsequently became part of STAR, with Mostert and Van Huyssteen joining the senior management team. According to the STAR financial statements, Tekkie Town made a pre-acquisition contribution of R732-m to its 2017 revenue.