SINGAPORE (Sept 17): It is a Tuesday evening, but Orchard Road is relatively busy. At Mandarin Gallery, several shoppers drift in and out of the Superdry store. Half of them are tourists, browsing through the racks of vintage-inspired T-shirts, camouflage jackets and denim. Over at Vivo city, another Superdry store appears as busy; about a dozen shoppers are milling inside as a queue forms at checkout.
The London-listed fashion brand entered the Singapore market in December 2014, after signing a 10-year agreement to be part of the portfolio of brands distributed by FJ Benjamin (FJB) Holdings in Singapore, Malaysia and Indonesia. Yet, the urban cool label, which counts David Beckham and Ed Sheeran as fans and Idris Elba as a design collaborator, has not quite helped turn around the flagging fortunes of the fashion retail house.
FJB, which sees itself as a brand builder developing retail and distribution networks in Asia, was once riding high on burgeoning consumer demand for both high street and haute couture. At its peak, the group’s stable included luxury labels Lanvin and Gucci, and watch brand Girard-Perregaux. It also created its own labels and nurtured budding designers.
But store sales began to languish amid the shift to online shopping and a general slowdown in economic growth. For its FY2013 ended June 30, 2013, FJB reported a 68% drop in earnings to $4.45 million from $13.9 million in the previous year. Its performance worsened in FY2014, to a net loss of $22.1 million. FJB remained in the red over the next three financial years. In December 2016, it was put on SGX’s watchlist.
The company, owned and run by the Benjamin family, embarked on a restructuring exercise three years ago. It shut down unprofitable stores, streamlined its backend operations and slashed costs. The senior management took a 70% pay cut. FJB announced earlier this year that the exercise had been completed, and it appears its efforts are beginning to pay off. After four straight years of losses, the company recorded a pre-tax profit of $939,000 for FY2018 ended June 30, 2018, though it still incurred a net loss of $1.2 million. That included an operating loss of $1.1 million from a discontinued brand.
However, FJB’s overall gross profit margins increased from 42% to 46%. Excluding its Indonesia business, turnover for FY2018 fell 20% to $166 million from $207.5 million the year before, as a result of the lack of contribution from the group’s discontinued business.
On the other hand, the group’s associate company in Indonesia saw revenue increase by 15% to $111.1 million, following the launch of a new watch brand. This would have brought total turnover to $277.1 million.
Another factor that boosted the group’s bottom line for the year was the opening of outlet malls in Malaysia. This enabled it to offload past-season apparel to be immediately sold, instead of renting warehouse space to store them until in-store sales are held.
Net cash flow from operations amounted to $8 million, an improvement from $2.8 million the year before. As at June 30, the group had a net gearing of 24% compared with 53% last year.
In 2017, FJB launched a three-for-five rightscum-warrants issue, its first fundraising exercise in 16 years. The rights shares of 3.5 cents apiece, priced at a discount of 22.2% to the group’s last traded price of 4.5 cents on Oct 17, 2017, raised net proceeds of $8.1 million when it was completed in April.
“We did a lot of realignment of brands. We’ve resized stores, we’ve restructured the whole business and today we are operating at markets in Singapore, Malaysia and Indonesia. Most of our stores are profitable,” FJB CEO Nash Benjamin tells The Edge Singapore. FJB now also retails Marciano, La Senza, Marc Jacobs, Tom Ford and Pretty Ballerinas in Singapore.
Beyond trends
FJB was founded in 1959 by Frank Judah Benjamin, Nash’s elder brother, who in July 2017 relinquished his position as executive chairman and was redesignated non- executive chairman. Frank’s eldest son Douglas is the group’s chief operating officer; a younger son, Samuel, is director of the luxury fashion and timepieces unit, while youngest son Ben-Judah is director of corporate strategy and business development.
In 2002, Douglas and his wife Odile established an in-house fashion label, Raoul. The “affordable luxury” brand started as a men’s shirting line before expanding to women’s wear. Sales took off, and FJB brought the brand to the US and Europe, and Mainland China, but those markets proved to be a significant challenge. “A lot of investments and effort went into this and while we were able to manage our investments, the whole retail market turned around four years ago, especially in North Asia. We then decided we could not continue the way we did in the past. So, it was a sad thing to do, but we had no choice but to wind down the business,” says Benjamin.
The last Raoul outlet in Singapore, in Paragon, was shut down in February 2016. This February, FJB also closed all Gap and Banana Republic stores in Singapore after their franchise agreements ended.
To be sure, the evolving retail industry has had several casualties over the past decade. In Singapore, the business environment remains tough and FJB’s peers have not been spared. Wing Tai Holdings, which operates the Topshop and Karen Millen stores, saw retail revenue falling 5.4% y-o-y to $136.1 million in FY2018, from $143.9 million in FY2017.
“The retail market is in a flux right now,” says Douglas, noting the lack of brand loyalty among consumers, and the constant chase for something new. “There is so much bombarding people every day. And I think that has caused the attention span of shoppers to be very short.”
In a recent report on global retail trends, consultants KPMG point out that retailers keen on differentiating themselves have to provide more than just goods to the customer. “Experience per square foot will be the new retail metric to measure success,” the authors note. “Leading retailers take advantage of their physical spaces to maximise experience per square foot and the real-life interactions customers have there.”
Additionally, retailers are also under pressure from the rise of the so-called “conscious consumer” who, led and influenced by millennials, values ethical practices. According to a report by market research firm Niel sen, at least two-thirds of consumers are willing to spend more if it comes from a sustainable brand. Italian label Gucci, for example, has signed on to the Fur Free Alliance, as have some of its competitors.
Bricks and clicks
CEO Benjamin believes the group is ready for its next phase of growth. FJB is in talks to bring in a European leather goods brand by next May. It also sees cosmetics as another possible avenue for growth. In addition, it has set up an Omnichannel Advisory Board and appointed three domain experts to assist in this effort. They are Marcelo Wesseler, former CEO of Singapore Post’s e-commerce unit and now managing partner of Codem.com; Jon Sugihara, head of global strategic partnerships at Google; and Tito Costa, Zalora’s chief marketing officer. The board will employ data analytics, leverage on the group’s existing network of bricks-and-mortar stores and integrate it with online platforms to create a seamless shopping experience.
Meanwhile, FJB expects to launch an online store for Superdry by early next year. Consumers can make purchases online and choose to have them shipped to their homes or pick them up at the stores. “It’s a completely different ecosystem of shopping today because bricks-and-mortar on its own needs online, and online needs bricks-and-mortar too,” says Benjamin.
The group also plans to open a new Superdry store in the upcoming CapitaLand development on the site of the former Funan DigitaLife Mall. The new mall aims to be Singapore’s first online-and-offline shopping mall, integrating online, offline, data and logistics to empower retailers’ omnichannel strategy.
