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FJB sews up new look for profitability
FJ Benjamin Group (FJB) CEO Nash Benjamin kicked off this interview arranged to garner deeper insights into the luxury retailer's future plans, with a song.
"Where do I begin?" the younger brother of Frank Benjamin, the trailblazing founder of FJB, crooned to the tune of a popular love song from the '70s. The humour belies the challenges the family has had to confront in recent years, where Singapore retailers are either struggling to survive or have bled into oblivion from haemorrhage.
Nash, 67, joined FJB - one of Asia's biggest retail brand management companies - in the late 1960s working in sales and marketing for labels like Lanvin and Amco, the Australian denim brand that was one of FJB's most successful early imports. In 1975, FJB opened Singapore's first luxury fashion store - a Lanvin boutique in the Hyatt hotel.
It now boasts 250 stores across Singapore, Malaysia and Indonesia, having clinched exclusive retail and distribution rights for luxury labels like Céline, Givenchy and Loewe as well as high-street brands like Superdry and La Senza.
"If you track our company over the last 10-15 years, we have been pretty robust. We grew turnover, topline, bottom-line and was profitable," said Nash, who took over the reins as CEO from Frank in 2006.
"The last four years have really been a difficult period because many things happened. Some within our control, some were out of our control," he shared.
FJB's market value has shrunk to S$24.5 million compared to its heyday. Year-to-date, its shares have fallen 26 per cent to about S$0.040 each, from S$0.065, when the broader market has risen.
Two main businesses have bled the firm. Most of the losses stemmed from Raoul - FJB's own label which was thrown into the spotlight in 2012 when the Duchess of Cambridge, Kate Middleton, wore a piece from its pre-fall collection. FJB was forced to shut Raoul boutiques in 2016. The other line that has been in the red is the soon-to-be discontinued franchise business of Gap and Banana Republic.
"When I say a chunk of these losses, it was really that which hurt us and while this was going on in 2014-15, we also had North Asia implode as far as our timepiece business was concerned. With all the anti-corruption initiatives out of China, expensive jewelleries and watches were zeroed out and people were not buying.
"Then we had in Indonesia and Malaysia, devaluations of 40 per cent in those two markets which was also very substantial. Nonetheless, we carried on."
For the fiscal year 2014, FJB reported its first net loss of about S$23 million since the 2008 financial crisis. It remained in the red for FY2015 to FY2017.
After some painful restructuring, which saw the group shut 26 non-performing stores but open 50 new stores, outlets and kiosks, FJB is confident its business is on the mend. For the first quarter ended September 30, 2017, it narrowed its losses to S$942,000, from a net loss of S$3.6 million a year ago.
"The main reason why it took a long time for us to turn the corner - four years - was we had leases for stores which we could not give up. We were tied down to these commitments. The other thing was also with Gap and Banana Republic, we had to run out the term of our agreements which expire in February next year. So our hands were tied," Nash said.
While FJB continues to ride through the closures of its 20 Gap and Banana Republic stores in the region, Nash is confident that the business is indeed turning around.
"We have introduced some new businesses which are growing nicely. In fact, if you look at our Q1 results ... if you remove the businesses we have discontinued and remove the sales to our Indonesian associates, our ongoing business actually went up from last year same period. Our losses have been pared down compared to same period last year.
"So, looking at the last quarter and looking at even the month of October, looking at how we are trending against our planned projections, we are quite confident that the trending is in line with what we basically projected and anticipated. We see improvements in the Singapore market. With what's going on in the property sector, the enbloc sales, we feel there is some kind of optimism in consumer spending we didn't see in the past. That too is an indication of sorts,'' Nash added.
Douglas Benjamin, FJB's group chief operating officer since 2012, said new lines like Marc Jacobs and Superdry are doing well, with the new stores "all ... generating profits".
FJB's business model has also changed. There was a time when a huge store, spanning thousands of square feet in malls, was emblematic of luxury fashion brands. Now, it seems smaller may be the way to go.
"Before we would have necessarily opened a lot of big stores, and paid a lot of rent. Today, we are opening brands that can operate in smaller areas where costs are contained but turnover is still there because the efficiency per square foot is much higher," said Douglas.
This strategy has been implemented for brands like Rebecca Minkoff and Pretty Ballerinas, with shops typically about 400 square feet each.
FJB will soon be launching five stores of US Polo Association - a brand established in 1890 and is the official governing body for the sport of polo - in the next 12 months.
"The product is affordable. We are hoping with these sorts of price points of S$20-$50 per item, this could be an opportunity for us," Douglas said.
Skincare is another new growth driver as they are largely recession-proof and don't go in and out of favour so quickly, he added.
Apart from managing its brand portfolios and shifting to smaller store premises, FJB will also be moving out of its Science Park 2 headquarters to a smaller outfit in December. This will result in S$1.2 million savings per year.
Asked if FJB would ever consider buying its own stores, Nash shook his head: "The better locations for our kind of businesses are in shopping malls. The good ones don't really sell spaces. In the 70s, there are malls built by a number of developers like Far East Group and a few others which did a lot of strata title sales. But once you do that, you can't control the tenant mix."
After some deliberation, FJB will be launching an online platform this year. This will be spearheaded by Ben, the group's director of corporate strategy and business development.
"We are in discussions with big online groups ... We have 250 stores. We can deliver an omni-channel linking online with our brick and mortar presence. That will be more compelling and offer a better value chain,'' said Ben.
As part of the group's cost-cutting measures, the family took a 30 per cent pay cut in July and recently, another 40 per cent. That's a total of 70 per cent - some S$1.6 million in savings per year from the family pay cut. To date only four family members remain in FJB's senior management - Nash, Douglas, Sam and Mavis, Frank's wife.
"We also have fewer people doing more. Douglas has taken over as group CEO and managing director of Singapore and Malaysia. Sam oversees both luxury and timepieces. Together with the 70 per cent pay cut, that's S$2.2 million savings this fiscal year," Nash explained.
On whether FJB will return to the black this fiscal year, Nash said: "We are seeing the numbers. They are ahead of our projections. We also have better terms for the brands we are working with. So we are more confident in that respect."
The proceeds from the S$39 million rights and warrants issue will help it "to recreate and revigorate the business in a meaningful way".
"We are trending. It is not a flash of one month or so. To be honest, the last thing we would have done is to go out and say we are trying to raise money and do a rights issue if we were not turning the corner or didn't feel comfortable that we were.
"The worst thing we can do is to go up to shareholders and say please subscribe to shares when we are losing money."