Nompumelelo Magwaza
Food and fashion group AVI opened seven Kurt Geiger men’s clothing stores during the six months to December. This brought to 22 the number of these outlets in major metropolitan areas including Gauteng, Durban and Cape Town.
The group plans to open three more shops this year.
Simon Crutchley, the group chief executive, said yesterday that the group had performed slightly better in this period and hinted at a possible acquisition during the course of the year.
The footwear and apparel unit was among the group’s star performers, growing revenue by 18 percent and lifting operating profit 35.8 percent to R231 million for the six months to December, with core brands Carvela and Kurt Geiger performing well.
The group said the improvement in this division was due to strong growth in sales volumes and higher gross profit margins at Spitz designer shoe stores.
AVI, which boasts more than 53 brands that include Willards chips, Five Roses tea, Bakers biscuits and Provita crispbread, increased its operating profit by 27 percent to R855m. Total revenue added 9 percent to R4.49bn.
Chris Gilmour, an equity analyst at Absa Investments, said AVI had surpassed the market’s expectations, especially in frozen foods and clothes.
It was important to note that AVI offered up-market brands bought by people less vulnerable to high prices.
Gilmour said: “It is hard to believe that brands such as Carvela and Kurt Geiger performed well under these strenuous economic conditions. This is due to huge aspirations and fashion statements on these high-priced brands.”
Frozen foods unit I&J lifted its revenue by 11.9 percent to R749m. The weaker rand caused a material increase in export revenue while export volumes grew as a result of increased fishing quotas.
However, the company added, prices in this division remained under pressure due to a decrease in demand from consumers and an increase in supply by competitors.
The biscuits and snacks business made profits ofR203m, up from R180m. This was supported by higher selling prices and improved sales volumes.
The beverage division, Entyce, pushed revenue up by 4.4 percent to R1.3bn, primarily on the higher selling prices of tea, coffee and creamer. This, according to AVI, was in response to increased raw and wrapping material costs.
Tea volumes rose by 8.4 percent due to promotional activity and tactical pricing.
Entyce was expected to benefit from improved volumes in the future following the commissioning of a new creamer tower and coffee agglomeration plant at its Isando factory, AVI said.
Crutchley believed that consumers would remain restrained in spending, especially in the current competitive environment.
“However, the group has good levels of forward exchange cover in place to limit the cost of imports and some commodity costs have started to soften, both of which will allow more leeway to manage the balance between price, volume and profitability with the flexibility that constrained trading environments require,” Crutchley noted.
AVI shares rose 1 percent to end the trading session at R45.85 on the JSE yesterday.