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Ian Moir, the Scottish-born chief executive officer of Woolworths, South Africa’s largest national department store chain, has spearheaded the company’s efforts to become a leading player in the Southern Hemisphere.

Fresh from a somewhat controversial $2 billion acquisition by Woolworths of David Jones, the upmarket Australian department store, Moir, who spent 10 years in Australia as head of Country Road prior to assuming his current position, talked to WWD about the opportunities David Jones presented for the South African giant. Parent company Woolworths Holding Ltd., ­which now owns, apart from David Jones, Australian brands Country Road, Trenery, Witchery and Mimco,­ has a market capitalization of around $5.1 billion and annual revenues of $3.6 billion, with Australia contributing about 16.4 percent of revenues.

In the latest company report for the financial year ended June 2014, Moir said the WHL Group turnover for 2014 delivered 39.7 billion rand, or $3.6 billion, up 14.4 percent on last year. This includes the fully integrated Witchery and Mimco businesses in Australia. This year, he said, “has been a remarkable one for the WHL Group. With the acquisition of David Jones, the achievement of 100 percent ownership of Country Road Group, the purchase of 33 stores from our franchisee in Botswana, Namibia, Swaziland and Ghana, and strong growth from Woolworths operations in South Africa — the group is now a leading Southern hemisphere retailer of real scale.”

Here, Moir on the past year and what lies ahead.

WWD: Woolworths seems to be positioning itself as a major fashion player in the Southern Hemisphere. Is that part of the strategy — the steady accumulation of brands from Down Under?
Ian Moir:
Woolworths recently acquired Country Road, one of Australia’s best-known brands.  It’s around a $1 billion turnover business. We’ve also been growing the Woolworths business very well, taking market share, growing that business over the past five years, repositioning it.  That shrank about 60 percent of the market.

We’re a big player in South Africa, and we’re becoming a much bigger player in Australia.  We did look five to 10 years forward and saw a very different Southern Hemisphere. We saw a Southern Hemisphere where the Northern Hemisphere players are coming in. You’ve got Zara, you’ve got H&M, you’ve got Uniqlo….It was happening in Australia, it’s happening in South Africa. We felt that the environment was going to be so different in five to 10 years’ time, that we would have to truly compete with the Northern Hemisphere.

And in order to do that, you had to have economies of scale, you need to have speed-to-market, you need to have a design facility, you need to have a product development facility. 

So what we wanted to do was create that scale, be first to market with that scale in the Southern Hemisphere. And we started looking around for the exact right position to be in order to create that scale. We’ve added Witchery and Mimco two years ago to the Country Road business, and then we saw in David Jones, a big department store in Australia, the opportunity to create a very big business with all of the economies of scale, with all of the benefits I mentioned, and to bring all those entities together to form what will be the biggest department store business in the Southern Hemisphere.
WWD: The biggest?
Actually the second biggest. A Chilean company is the biggest, I think. But we’re very excited. We’ve spent a lot of money on the acquisition. We spent nearly $2.2 billion on David Jones.
WWD: David Jones seemed like a good fit for Woolworths?
It wasn’t just about creating the scale and the ability to compete in the future driving the acquisition. We also saw an opportunity with David Jones. We saw a company we really felt we could turn around, we felt we could fit into our business really easily and well, we could improve the profitability of and we could really improve the customer proposition in that marketplace.

So we went out and bought that, and we acquired the balance of the shareholding in Country Road. Now we’ve got two fully-owned very large businesses in Australia. Woolworths continues to grow from strength to strength. We’ve taken market share here [South Africa] and we’ve also grown in Africa. So we see exciting — and challenging, for sure — times. And we have a business with good momentum.
WWD: And the shareholders?
Our shareholders have responded extremely well. We had 98 percent who voted in favor of the acquisition.
WWD: There was a slight glitch, though, wasn’t there, with one shareholder holding out? (Solomon Lew, an Australian rag-trader, did not vote on his 53.6 million shares. David Jones shareholders nevertheless voted 96.81 percent in favor of the acquisition last July.)
That was over in Australia, not South Africa. All the Woolies shareholders voted 98 percent for it, which was amazing. And this is a strategic, very long-term play. Also, if I’m being honest, there is something opportunistic about this because we know we can turn this business around.
WWD: But David Jones would remain an Australian entity?  You won’t open a David Jones, say, in Johannesburg?
No, we won’t. There are 38 stores [in Australia], but we see the number of stores expanding. They’re very big stores — it’s a real icon in Australia, one of the most well-known stores. A bit like what Woolies is in South Africa, everybody knows it.
WWD: But is David Jones a bigger department store than Woolies, with more categories?  Or is it pretty much the same?
It’s pretty much the same.  Obviously Woolies may be a slightly bigger business because of our food department, but in clothing, David Jones would have slightly more categories than Woolies, but not much.  Because it doesn’t really have a private label business, which is what we’re going to bring in. But it’s got a lot of international brands, and a lot of local brands in there, as well. All the top international brands are there, Prada, Chanel…all the top names you can think of.
WWD: So how do all your brands — Country Road, Trenery, Witchery — fit into the market in South Africa with all the other players present right now?
They’re sitting at the top end of the market in South Africa.

WWD: Because they are relatively well-priced, but not that cheap.
Yes, that’s the top end of our offer. It’s a high-quality product with very good quality yarn and fabrics, good quality of make, and it’s pure design. So you’re getting a top-end product for a very reasonable price. And the business in South Africa has been growing extremely well. Our like-for-like growth from last year was 28 percent.

We just launched Witchery, and that’s gone really well. So there’s a real gap in the market, and it’s working really well for the customer.
WWD: So what is the positioning of each brand? Trenery, for instance, is aimed at a slightly older market than Country Road.
Witchery is younger, sexier, more party, more going-out, more dress-up than Country Road. Country Road is younger than Trenery, yes, but it’s more casual, smart-casual. Trenery is slightly more classic, slightly more conservative and the yarns and fabrics that we put into the Trenery products really resonate with that older, wiser, more aware customer.
WWD: And what about your own-label brands? There’s Studio W and Re, your in-house denim label.
Studio W has gone really well. It’s similar in customer segment to Country Road, but just more accessible in terms of price points. It’s working extremely well, we’re getting good double-digit growth.

What’s really exciting about that is that we’re getting more younger black customers buying that product, which is really what we want in our business.
WWD: Does that extend to the young black male customer as well? How is men’s wear doing?
Men’s wear Studio W is going really well; men’s wear, in fact, is doing generally well.  We’re taking market share of men’s — we’re getting double-digit growth overall in men’s, but in particular, out Studio W men’s wear range is much younger. You’ve got a young black guy — the urban male —buying that product, which is great.
WWD: It is wonderful to have many more options for men in South Africa, sartorially speaking, because that used to be quite tough, finding decent men’s wear.
I think we’ve made a real difference. I mean, there are some good businesses out there, some good denim businesses, particularly in South Africa, for men. But, if I have a look at what we’ve done, in bringing in Country Road, bringing in Trenery, bringing in Witchery, really transforming Studio W and Re, taking that offer and making them much more modern than they were, with very fast turnaround and real speed-to-market in men’s and women’s, I think we’re making a big difference in the South African market. I think we’ve also introduced a level of fashionability that wasn’t there before.
WWD: How do you assure speed-to-market? Is the bulk of production still in China?
It’s quite a mix. For Woolworths, a significant portion is produced in SADC [Southern African Development Council] countries. Two of our top three suppliers — one is in South Africa, one’s in Mauritius.  There are actually a couple in Mauritius. We have a development center in China, so we have our own facility of around 50 people who are monitoring design and quality control and relationship with our supply base. It’s quite a spread.

Similarly for Country Road, we have around 60 percent that is produced in China, but all the yarns and fabrics come out of Italy.
WWD: So you more or less control the supply chain.
That’s exactly right. What we do is we make a commitment in fabric and yarn, so we have fabric and yarn banks that allow us to have speed-to-market. In-season and in knitwear, we can get a turnaround time of about six to seven weeks. It makes a big difference, because it means you can trade in-season.
WWD: The seasons — is that part of the strategy, sticking to the Southern Hemisphere instead of trying to conquer the rest of the world?
When I was running Country Road in Australia, one of the things I did first was shut down all of our American stores. We had 22 of them. It was actually a well-loved brand, but we just weren’t making any money off it. We had a big head office in the States, but given the size of the business, our overhead costs were too high. We’d been there for 14 years and never made any money! So we exited the U.S.

But the big thing for me is that trying to do two hemispheres at the same time is really hard. It’s completely contra-seasonal. If you think about it, there aren’t many companies in the world that do it. Zara is one of the few I can think of; they’ve been in Brazil for around 15 years, and they’ve got a South American presence. But there aren’t many others running a Southern Hemisphere and a Northern Hemisphere range at the same time for very long.  But you’re beginning to get the likes of Zara, H&M and Uniqlo coming into Australia and South Africa, so it’s going to be testing time for these brands because they don’t have any scale in the Southern Hemisphere.

Which is why one of the things we wanted to do was be the first in the Southern Hemisphere to create that scale, to create great values for our customer, and create speed-to-market and more fashionability for our customer.
WWD: When you say Southern Hemisphere, are you looking at South America at all?
Not at this point. We’re concentrating on Australia, New Zealand, Africa and southern Africa. I had a look at Brazil, but decided it was too hard, barriers to entry, taxes and other complications. The cost of retail is high, the cost of doing business is high….We decided it was much easier to expand in Australia and in South Africa.
WWD: It makes sense, though, in terms of retaining control over the business.
Yes, we need to be very careful. Two billion dollars is a big deal and we need to consolidate our position, build our position from this strength that we’ve created. I think we need to be careful not to try too many more markets. It’s important not to take our eye off the ball.

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