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FJ Benjamin is back on track to profitability after being hit by the pandemic

Bryan Wu and Samantha Chiew
Bryan Wu and Samantha Chiew • 9 min read
FJ Benjamin is back on track to profitability after being hit by the pandemic
FJ Benjamin’s CEO Nash Benjamin (left) and his nephew, COO Douglas Benjamin. The Benjamins regrouped to turn FJ Benjamin around and the company is back in the black for FY2022. Photo: Albert Chua/ The Edge Singapore
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Every event is a family affair with the Benjamin family, owners of local retail distribution company FJ Benjamin Holdings (FJB). At its results briefing on Aug 25, CEO Nash Benjamin and his nephew, COO Douglas Benjamin, talked over each other in a comfortable way that only family knows. The Benjamins showed their mastery of talking to the media too, keeping the mood casual and inviting but also engaging — the way they hope their brands will appeal to consumers.

As with all families, there are rough periods, and all the more so for those in business together. The Covid-19 pandemic was not kind to the fashion and lifestyle retailers. The previously mainboard-listed company was placed on the Singapore Exchange (SGX) watchlist due to pre-tax losses for more than three consecutive financial years and a market cap of less than $40 million.

Just before the pandemic began, FJB had completed a restructuring exercise looking to a trendier future to bring the company back to profitability. There were some initial improvements.

For FY2019 ended June 2019, the full FY before the pandemic hit, the company managed to record earnings of $177,000 — a turnaround from losses of $1.2 million for FY2018 and deep red ink of $17.4 million for FY2017.

But before this trajectory of growth could continue, the pandemic shut down travel and shopping in an unprecedented fashion. Badly affected, FJB plunged back into the red in FY2020 with a loss of $15.0 million and continued into FY2021 with a loss of $10.9 million.

During FY2020 and FY2021, the pandemic’s effect on the overall market and economy was devastating, making opportunities for profitability, especially for retailers like FJB, even more scarce when people were forced to stay indoors as malls all around the world shuttered, and spending habits changed. “We had a lot of plans of growth [before the pandemic], but the pandemic happened, and we had to pull back,” says Douglas.

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FJB did, however, learn a thing or two from the pandemic, which forced the company to rethink its business platform and fast forward its e-commerce push while catering to new trends that emerged from the pandemic. This shift saw FJB venturing out of the fashion space to bring air purifiers and skincare products into its portfolio.

The Benjamins regrouped to turn the company around from the pandemic. It shifted its listing to the Catalist from the Mainboard so that it can exit the SGX watchlist. It raised additional capital of $3 million by placing out shares at 2.5 cents to tycoon Phillip Ng who leads Far East Organization, raising his interest in the company to 16.7% from 7.4%. The company is now back in the black for FY2022, as key markets bounced back with Covid-19 restrictions easing over the past year.

For FY2022, the company reported earnings of $3.0 million, as governments eased safe distancing restrictions, borders reopened and, most importantly for them, customers returned to shopping malls and began spending on fashion once again.

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FJB posted a full-year revenue of $80.9 million for FY2022, a 21% y-o-y increase from $66.8 million in FY2021, while its gross profit came in at $39.9 million, up 18% y-o-y. Gross margins decreased marginally, from 50.5% in FY2021 to 49.4% in FY2022. “Gross margins were down by 1% as we wanted to move out some stock in Malaysia because of pent-up demand,” Nash explains.

Sales in Singapore and Malaysia were up by 6% and 28% respectively in FY2022, while sales from its Indonesian associate grew 16% for the period.

Nash explains that following a sluggish first quarter when many of the company’s stores were still partially closed and sales were disrupted due to intermittent Covid-19 disruptions, sales momentum picked up strongly in 2HFY2022, which saw earnings of $4.3 million compared to a loss of $7.2 million in 2HFY2021.

Operating expenses for the company was down by 2.4%, from $40.1 million in FY2021 to $39.1 million in FY2022, which saw writebacks totalling $1.5 million for impairments and reversed allowances for expected credit losses on receivables from an Indonesian associate and related party in its second half.

Adding on, Nash explains that it had to roll back on certain impairments over the last two years of about $1.4 million, which allowed the company to recognise a profit of about $3.0 million.

News of the company’s turnaround has stirred back some trading interest in the stock, which closed at 2.7 cents on Sept 13, valuing the company at $32.0 million.

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The retail landscape has never been easy to navigate, depending heavily on ever-changing consumer trends. Nash explains that there were times when brands carried as part of its portfolio refused to keep up with changing preferences and started becoming “out of trend” with consumers, forcing FJB to ditch those brands.

Unfortunately, closing down brands and shuttering the stores carrying those brands takes time and money, as there’s always im-
pairment to be made and landlords to deal with. But every shop closed is a lesson learned and a step close to FJB building a more resilient portfolio.

“We achieved what we wanted — we right-sized the business because our turnover came down so our costs were managed in line with our revenue. And then before we could really do anything with our [plans for growth], Covid-19 [hit], and we just pulled everything back,” he explains.

Closing down brands is an ongoing process. Even before the pandemic, FJB had to stop carrying brands such as Gap and the Banana Republic that fell out of fashion.

In FY2022, FJB reviewed its regional retail footprint and closed 13% of stores, or 21 stores, that underperformed on acceptable
rental-to-revenue ratios. At the same time, it opened seven new stores, bringing its total network to 144 stores, compared to 169 in 2020. This is a level that Nash says the company is “quite comfortable” with. Of the total, just 13 stores are in Singapore, with the majority spread across Malaysia and Indonesia.

Nash says: “We will continue to optimise our inventory and manage costs while we develop new business models to diversify our customer base.”

As with all businesses, Covid-19 forced FJB to relook at its business platforms as e-commerce spiked. Its online business, which now includes 14 brands, posted encouraging results with the company ramping up marketing activity just before the Covid-19 lockdown in 2020. For FY2022, turnover from online channels accounted for 6% of total sales in Singapore and 3% in Malaysia.

Since the relaxation of Covid-19 restrictions and with customers returning to brick-and-mortar stores, FJB has noted a decline in online sales. The way Douglas sees it, it is data-points like these that keep him adamant that the retail business has plenty of life left, despite the online shift of some consumer spending habits.

“People have said over the years that [physical] retail is a dying business and that we are not going to be around 10 years from now, because everybody will just be shopping on the internet. But retail can’t die unless you’re willing to walk outside with no clothes and no shoes,” he says, adding that there is still a need for consumers to go out to try on these clothes before finalising their decision to purchase.

“You always need to buy clothes and shoes, a handbag or two — so retail is here to stay. The key is for us to figure out how the customer wants those items delivered to them,” adds Douglas, who is also the vice president of the Singapore Retailers’ Association. This is where FJB comes in with its online, as well as online-to-offline, offerings.

Fresh looks

FJB, whose current mainstays include fashion brands such as Marc Jacobs, Rebecca Minkoff, Guess and Superdry, has in the past two years started a health and wellness segment for brands like air purifier company Airfree and luxury skincare label Barbara Sturm. The company recently announced the introduction of another luxury skincare brand, MZ Skin from London, as well as American footwear brand Cole Haan to its portfolio.

“Now that things have recovered, we’re looking at what the consumers want. If you look at what is doing very well in the market now, it’s no secret that high-end luxury is doing very well. It recovered the first and it continues to keep its recovery going,” says Douglas.

He believes that as a result of lockdowns at the height of the Covid-19 pandemic, people stayed at home and spent more time, effort and money looking after themselves compared to when time was spent travelling to and from their jobs. “Now that they’ve had a taste of spoiling themselves with beautiful skincare products and they all look better, they’re going to continue using these products,” Douglas adds.

Meanwhile, Nash points out that several consumers may associate American fashion brand Cole Haan as being “old”, but FJB’s due diligence has found that Cole Haan today has revamped itself to cater to current market trends. This is exactly the kind of brand FJB is on the lookout for — a brand that keeps up with trends. “We have had Guess for 31 years already and it’s been reinventing itself constantly. Today they are on top of the world in the US and in Europe,” says Nash.

“In fashion, it is key that the products and offerings are relevant to the consumer because when there is so much competition, the consumer has a choice. You have to be right in your look, your materials and what you present in your price-points,” he elaborates, citing Rolex as an example of an “evergreen” company that has successfully navigated the fickle fashion industry.

Douglas adds: “The product doesn’t just invent itself and the business strategies don’t invent themselves. It’s the people in the companies and behind the brands that are the ones we look at and ask if the company has great leaders. Do they have great vision and longevity, and do they keep reinventing themselves in the face of changing fashion and customer requirements and demands?”

According to him, FJB has been fortunate to have “hitched its wagon” to “great brands” that have been around for a long time and that are well-managed, and hopes to carry on de- veloping these relationships.

Photo: Albert Chua/ The Edge Singapore

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