The JD Group: Adapting to present day economic challenges

The changes that have taken place within South Africa over the past 32 years have been nothing short of monumental. From a retail perspective, preferences have become increasingly sophisticated with greater choice in markets and this has seen an array of opportunities. Certainly the JD Group, formed in 1983, has evolved to hold a strong market position today.

The Johannesburg-based company provides value conscious mass-market customers in southern Africa with the opportunity and means to create a comfortable lifestyle, through its diversified retail and consumer finance businesses.

livignWhich is a long removed from the business established in 1983 as Price and Pride – a retail furniture distributor. By 1986 the business had acquired Joshua Doore and gradually grew to the point that the business became publicly listed on the Johannesburg Stock Exchange in 1986.

Further acquisitions lead to the change of name to JD Group Ltd. in 1988 and by 1991 the company had become a cash business and was managing the credit business of JD Sales (Pty) Ltd. By 1993 the JD Group had grown into the largest retailer of furniture, household appliances and home entertainment on the Continent.

Today, following a number of acquisitions, the business operates in a number of markets, catering for the customer lifestyle through retail furniture, consumer electronic and technology goods, household appliances, building materials and DIY products, automotive sales and consumer financing. The retail side of the business includes well known brands such as Joshua Doore, Barnetts, Russells and Hi-Fi Corp. In 2013 the company amassed revenues in excess of R30 billion.

However, the present economic environment has made credit an increasingly challenging proposition for retailers and in September, with South African companies scaling back credit to low-income consumers, who were struggling to repay loans in the face of the weak economy and rising food and fuel prices, it was announced that JD Group was looking to sell is finance unit.

In December it was announced that BNP Paribas’ personal finance arm had agreed to buy the consumer loans business of JD Group JDJ.J for an undisclosed sum.

Under the deal, BNP’s South African RCS unit will acquire JD’s current loan book, with the assets guaranteed by JD parent Steinhoff (SHFJ.J), the French bank said in a statement.

The JD Group, which is nowadays 86 per cent owned by global furniture manufacturer and retailer Steinhoff [JSE:SHF], said in a statement that it had agreed to sell its finance unit to an international consumer finance group.

Back in 2013, The SA-Mag spoke to Bennie van Rooy, CEO for the Consumer Finance Division, who described the business model at that time:

“Our diversification has helped to reduce our reliance on one source of revenue – furniture for example, can be a very cyclical business and the impact of the economic downturn, whilst not as severe in South Africa, can affect consumer sales,” states van Rooy.

“Today automotive accounts for about 47 per cent of our revenue, with the retail business (furniture and consumer electronics) making up 40 per cent and 13 per cent attribute to consumer finance revenue.

“Our automotive involvement began in 2011 (along with our building suppliers division) and we sell new and second hand vehicles at 88 dealerships across South Africa. We sell all major brands but have a strong association with Toyota, as well as General Motors, Nissan, Renault, Volkswagen, BMW and Mercedes.

“This business has performed well to date and offers us a good, solid source of revenue, without offering huge growth in the near future. Automotive is a durable product but is sensitive to changes in the economy and the exchange rates affect vehicle prices, so whilst the return is healthy, it is a more stable form of income.”

All of this has been achieved whilst the JD Group does not manufacture, relying instead on a broad series of stores (over 1,020 furniture stores, 100 consumer electronic stores and 80 building supply stores) and numerous warehouses and distribution centres.

sofaOf course sustainability is a word that has entered the psyche of businesses around the world over the past couple of decades. In challenging times, JD Group is no different to any other company in embracing change to provide a long-term future. In 2013, the business published a Sustainability Report which outlined the company’s priorities succinctly:

“JD Group is committed to creating long-term sustainable stakeholder value through ethical business practices, ensuring competitive returns to its suppliers of capital, providing employment, minimising harmful environmental impacts and promoting social and economic development across the broader South African society.

“The Board regards JD Group as integral to the South African society and therefore the Group acts as a responsible citizen in its social, environmental and economic interactions with stakeholders. Board decisions take cognisance of the impact they may have on the Group’s sustainability and current needs are evaluated to ensure that the ability of future generations to meet their needs is not compromised.

“While the Group acknowledges that social transformation is important to redress the unfair practices of the past, the Group’s business perspective remains aligned first and foremost with the expectations of its shareholders and the Group’s future wellbeing. This is because informed investors assess the quality and sustainability of the Company’s economic performance as most essential in this triple-bottom line accord, hence the Group’s zero tolerance in respect of anti-competitiveness.

“The philosophy of leadership, sustainability, corporate responsibility and citizenship is core to the Group’s own strategy and evidenced by a statement of the Chief Executive Officer, David Sussman: “As one of the leading retailers in South Africa, JD Group embraces any lawful initiative aimed at ensuring the future prosperity of our country, as well as that of the Group. The importance of transformation, upliftment of the communities and the impact on the environment in which we conduct our business cannot be underestimated. Our existence and future profitability can only be achieved with the support of our customers and the communities in which we operate”.”