Verimark wants to skedaddle offshore ... and that’s not all
Direct retailer feels heat from weaker rand as it can’t always pass on imported costs to local consumers
Direct retailer Verimark is determined to revisit plans for international expansion in a bid to curb exchange rate vagaries. Verimark is notoriously vulnerable to a weak rand exchange rate as it cannot always pass on the increased cost of its mostly imported product lines to local consumers.
Speaking after the release of strong year to end February results on Monday, Verimark CEO Mike van Straaten said plans were afoot to identify possible offshore markets.
In the past financial year no revenue was generated from international business.
He said it was difficult to quantify the financial impact of an offshore thrust at this early juncture – reminding that 12 years ago Verimark traded in as many as 40 overseas countries.“Obviously the bigger, the better. A medium term target would be to generate 25% of revenue from offshore business. We would probably look at 30% to 40% of the business coming from offshore over the longer term.”
The decision to pursue offshore business with vigour ironically comes not long after Verimark liquidated its startup operation in Singapore.
Van Straaten stressed that the international push would entail a distribution model that marketed Verimark’s existing product range into various countries – including a strong drive into African markets.
“Verimark recognises that there are a number of markets in Africa in which we are not yet represented that could benefit our combined direct-retail model.”
In another effort to mute the effect of a weaker rand, Verimark is also set to launch a locally manufactured range of cosmetics under the O’rea brand. In the financial year under review Verimark scored from strong sales in brands like Bauer (cookware), Floorwiz and Genesis (cleaning equipment) as well as IPlay (educational toys).
Van Straaten said the strengthening of the average rand/dollar exchange rate enabled the company to keep selling prices the same as the previous year, and, in some instances, reduce prices. Profit before tax increased 25% to R46.7-million with the dividend hiked by a third to 15c/share.
Van Straaten said 11 new Verimark Emporium Stores were opened in the financial year with plans to open another nine stores in the new financial year.