Woolies Loyalty Scheme Pays off in Food Sales

PART 1

WOOLIES LOYALTY SCHEME PAYS OFF IN FOOD SALES

Business Day dated 18 February 2011; report that for 26 weeks ending December 26. Woolworths CEO Ian Moir announced that food sales grew by 11.8% for the 26 Weeks ending December 26 2010, whilst the comparable stores sales grew by 9% during the same period. Clothing sales including Country road grew by 11.5%, with other same store sales growing by 9.2% in the period and the overall clothing and general merchandise growing by 8.1%. Margin improvements were attributed to the loyalty programme that kept the customers coming back. The loyalty programme managed to achieve a set 9 months target in 13 weeks. Continual margin improvement in gross profit was also attributed to the procurement of better food and clothing. Loyal Customers are offered discounts and are rewarded for shopping across the brands. "The marketing is more targeted and has changed the way we communicate with the customers. This will drive the market share gain in the future". The company is to continue with the strategy of enlarging stores instead of opening new stores

MUSTEK BOUNCE BEFORE BOOM

Financial Mail Dated December 5, 2010 reported on "Mustek Bounce Before boom". Mustek is a South Africa's leading branded assembler and distributor of PC's, Notebooks and related products. Mustek has announced increase in its profit of 150% over 18 months for the period ending Oct 2010. This increase in profit is attributed to Mercer's market that remained at steady growth of 16-18% and the rise in popularity of Laptop and Notebook PC's linked to the technological environment. This means that the company did not have much to do with the shift from the use of Desktop to Laptops and Note book PC's.

In SA and globally, desktop sales are growing at 2% and laptop sales at 20% whereby half the PC's sold are laptops. By acquiring distribution right to Toshiba and Acer laptops being part of the global top 10 brands was a definite conquers in the market. "The strategy held the line, with Mustek generating PC related sales of R1.59bn in the year to June 2010 compared with R1,66bn in 2007/2008".

COMAIR TURBULENT TIMES

Financial Mail Dated February 25, 2011 reported an increase of 26% of Comair's capacity through their introduction of three Boeing 737-800 air craft and improved fleet utilization. Despite trying to maintain their margin in a depressed industry and the recessionary environment and tariff increase between 30% and 40% by state owned service providers, revenue was 24% higher at R1.7bn, attributable to a proportional increase in passenger volumes. This was enough to cover both inflationary cost increases and lower average ticket prices.

Profit for the period was 48% higher at R48m as operating profit jumped 37% to R74m, resulting in an improved operating margin of 42% which is higher than the 3.8% margin for 2009. In May 2010 the group issued additional R69m ordinary shares at 180c in a rights offer, increasing the number of shares in issue by 16% to 489m.

SHOPRITE - COMPETITION CLOSES IN

The article appeared in the Financial Mail dated 25 February 2011, page 60 & 61.

The food retail giant lifted sales by 9.4% to R36.26bn, headline EPS (earnings per share) to 13.6% and its interim dividend by 10% in the six months to December 2010 compared with the first half of 2009/2010. The early adoption of a centralised distribution model enabled Shoprite to lift trading margins by enabling it to supply small convenience stores demanded by consumers. PnP, Shoprite's competitor will only complete its move to a centralized distribution model in 2014. All the big competitors have set up or are in the process of setting up central distribution centres as these minimize the amount of daily deliveries to a store when compared to the supplier-serviced model. Shoprite has a total of 1 505 stores, 215 of these stores are in 15 African countries outside of South Africa. This new market development strategy gives Shoprite a big first-mover advantage over other SA food retailers. Shoprite will open 16 additional stores in Nigeria in 2011 and with this market development strategy Shoprite will be able to support its growth potential in Africa. Shoprite also increased its global sourcing capacity by taking head that a key element of Walmart's model is to globally source at the lowest prices. This will enable Shoprite to use pricing aggressively as part of its marketing strategy. Shoprite is currently not making use of a single strategy but rather a combination of strategies, whether these strategies were all launched at the same time is unclear from the article, but it is surely paying off as Shoprite it currently rated as the blue-chip among SA food retailers.

DISCOVERY HOLDINGS - SEVERAL IRONS IN THE FIRE

The article appeared in the Financial Mail dated 25 February 2011, page 62

Discovery interim results showed a 45% increase in pre-tax profits to R1.7bn and group new business was up 15% to R3.74bn. Discovery follows a strong new products/services strategy and although some of its products are gimmicky and complex, its current growth prospects seem underrated. Discovery CEO Adrian Gore is very secretive about the possibility of Discovery setting up a short-term insurance business saying that they will only go into a new line of business if there was scope to do it differently. Discovery diversified to such an extent that 60% of its operating profit is derived from insurance and investment. Discovery Health remains the core of the group where cash flow remains higher than at the Life business. Vitality set up a joint venture with America's fourth-largest health insurer, Humana, to sell Vitality into its client base. Discovery provides the intellectual property, human resources, systems and networks. Discovery also launched a purple card to compete with American Express and Diners club. Since 2005 Discovery showed a steady increase of between 12-28% growth year on year in their new business

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