Steinhoff has rarely been out of the retail headlines this year yet surprisingly little is known of the South African retail giant.
It has made waves in recent months by launching two failed takeover attempts, that of Home Retail and also French electricals retailer Darty.
But it looks set to be third time lucky for Steinhoff as it edges ever closer to acquiring value giant Poundland. Steinhoff is expected to complete a £597m swoop for Poundland in mid-September.
“It’s not an understood business”
Sean Summers, Steinhoff UK chief executive
But, despite a market capitalisation of €21bn (£17.6bn) and nearly 7,000 stores worldwide across 40 brands, outside of South Africa Steinhoff is "not an understood business”, according to its UK chief executive Sean Summers.
He says: “One of the advantages up until now is that Steinhoff has managed to be this sort of silent mover in the world.”
Much of the interest around Steinhoff is prompted by the fact that its largest, yet still minority, shareholder is South African billionaire Christo Wiese. His links to Steinhoff were forged when his fashion business, Pepkor, was acquired by the South African giant in late 2014.
He is also known as ‘Mr Shoprite’ for having a controlling stake in South Africa’s biggest grocer.
On top of this Wiese is a backer of investment vehicle Brait, whose assets include New Look, Iceland and Virgin Active.
But with the Poundland deal and the publicity it has attracted, Steinhoff this week raised its head above the parapet by tasking former Asda boss and Pepkor Europe chief executive Andy Bond and Summers with explaining Steinhoff’s business model to journalists at a briefing in London.
Since being founded in 1964 by Bruno Steinhoff in Westerstede, Germany, Steinhoff has developed into a retail behemoth that operates in 30 countries across Europe, Africa and Australasia. It employs 105,000 people globally and switched its primary stock market listing from Johannesburg to Frankfurt last year.
Led by chief executive Markus Jooste, it covers a vast array of sectors, including furniture, appliances, general household goods, clothing and footwear and even automative.
Around 60% of its revenues come from Europe, where is it the continent’s third largest furniture retailer – it operates Conforama in France and Bensons for Beds and Harveys in the UK. A third of sales come from Africa and 7% from Australasia.
Summers describes Steinhoff as a “diversified, international value and discount retailer”.
But Steinhoff is not simply a retailer. It prides itself on the fact that it is a vertically integrated business, which has vast manufacturing, sourcing and logistics services.
In the UK for example, it produces around 1,800 mattresses a day at plants in Huntingdon, Cambridgeshire, and Wellington, in Somerset. Its brands include Relyon, Staples and Sleepmasters, which are distributed to high-profile retailers such as Tesco, Next, Marks & Spencer and John Lewis.
But with all these diverse operations, how does Steinhoff manage its businesses?
Summers describes it a “very decentralised business” that gives “total autonomy” to each operation. In this way, he regards Steinhoff as the antithesis of Ikea.
“The only retailer who has got it right globally with a one-shoe-fits-all philosophy is Ikea,” says Summers.
“Steinhoff is fundamentally different. We are more aggregators of retail businesses, we understand totally that in all of these diverse geographical markets that we operate in, it is vitally important that each and every single operation is run by an entrepreneur who lives, sleeps, dreams and eats the business for that country.”
Summers is adamant this is the approach that will be adopted at Poundland. “There’s not going to be some SWAT team coming in and changing everything overnight,” he says.
The question remains over whether new Poundland boss Kevin O’Byrne, who only officially took over from Jim McCarthy this month, will stay on.
When asked about this, Bond would not be drawn, but said: “Kevin is a seasoned retailer, he might not be a seasoned retailer at Poundland, but he is a seasoned retailer.”
Speculation has also mounted over Steinhoff’s potential plans for Poundland’s stores, bearing in mind the South African firm’s discount fashion chain Pep & Co and its recently launched discount variety chain Guess How Much!
Again Bond will not be drawn on plans, but points out there are opportunities to leverage some of Steinhoff’s existing infrastructure, which includes sourcing from China and back office functions.
And Bond remains predictably upbeat about the opportunity around Poundland, despite the retailer’s recent woes, partly inflicted by the big four grocers' ongoing price war. Full-year pre-tax profits, including 99p Stores, fell 83.7% to £5.9m despite sales growth of 18.7% to £1.3bn.
“The competition has sharpened up its act – the big four retailers are lowering their prices.”
But he adds: “The discount sector is still growing dramatically. With a bit of sharpening of its proposition can Poundland be a success? Absolutely.”
How does Andy Bond know Christo Wiese?
“I got to know Christo when I worked at Walmart because I led a team that looked at a market entry for Walmart entering South Africa,” explains Bond, who led Asda for five years until he quit in 2010.
“He (Wiese) was one of the characters I met so I got to know him then. I set up an investment company independent of Pepkor and I approached Christo as an individual and asked if he would invest behind me. He at the time said I would rather you work with the Pepkor guys directly.”