CONSUMER brands giant AVI is desperately hoping healthy footwear company Green Cross can pull itself up by its sandal straps.
AVI paid over R380m to acquire Cape Town-based Green Cross in 2012. The acquisition has not hit the profit strides expected, and has proved a drag on AVI’s footwear division – which includes the strong performing Spitz high fashion footwear business.
In the year to end June Green Cross reported revenue dropping 36.5% largely due to lower sales volumes. AVI said sales volumes were impacted by soft demand and wide-spread discounting in the mid-price comfort footwear segment in the period prior to lockdown.
The group said Green Cross also saw a significant loss of revenue during the lockdown with all the retail stores closed during the level five lockdown from 27 March to 30 April.
AVI said stores only opened on a phased basis during May, and indicated that trading post re-opening was subdued due to weak economic conditions and poor shopper footfall at many shopping malls.
If there was a bright spot then it was that Green Cross managed to push the gross profit margin higher after converting to a full import model.
Fixed costs also have decreased with business being integrated into the Spitz management structure.
However, these improvements were not enough to offset the impact of lower sales volumes, resulting in an operating loss of R32 million for the year.
AVI will now be looking to kick up profits with increased promotional activity to manage the stock build-up and by right-sizing store footprints to match smaller brand opportunity.
AVI’s investment presentation showed that trading density for Green Cross had dropped below 30 000m2 compared with over 42 000m2 the previous year.
AVI said it also intended leveraging further synergies from Green Cross’ integration into the Spitz business structures.
