FJ Benjamin navigates the new normal

AFTER more than two months of shuttered stores, and with consumers around the world observing social distancing and stay home orders amid the Covid-19 pandemic, retailers are scrambling to adapt. FJ Benjamin (FJB), one of Asia's biggest retail brand management groups and distributors of luxury and lifestyle brands, is no different.

When Singapore and the world did the unprecedented and shut borders to stem the spread of the virus, they inevitably slammed shut access to one of the biggest forces in global luxury spending: mainland Chinese consumers.

"It has been tough weathering the epidemic, and we are waiting to reopen," Nash Benjamin, chief executive officer of the Singapore-based company, told The Business Times (BT) in a virtual interview earlier this week.

The group has spent the last few years restructuring its business - closing down loss-making stores; discontinuing laggard brands; and right-sizing operations. Today, it carries only two high-end luxury brands - French heritage brand Faure Le Page and American designer Marc Jacobs - in its portfolio of 18 brands. The group will also be e-tailing - or selling online - a few new brands including popular and trendy Los Angeles-based streetwear label Anti Social Social Club and Swedish footwear Axel Arigato.

FJB now has 15 stores in Singapore, 200 in Indonesia and over 70 in Malaysia. It has returned to profitability for financial year 2019, generating a net profit of S$177,000 against a net loss of S$1.2 million the year before. Turnover was S$131.5 million, and gross profit margin improved to 49 per cent from 46 per cent on a better yielding portfolio.

"And then we have the Covid-19, which appeared on our shores and globally," said Mr Benjamin, who is the younger brother of FJB's non-executive chairman Frank Benjamin. The latter founded FJB in 1959 and listed it on the Singapore Exchange (SGX) in November 1996.

"But we don't see any big movements or retrenchment of staff because we run a pretty lean ship. There may be one or two adjustments we will make, but nothing major," he said.

As early as February, sales had fallen substantially even though the stores were opened. Counting the costs of unsold stock and tougher days ahead, FJB cut its inventory flow, marketing costs and part-timers, but never furloughed any staff.

"I am not saying we may not need to but we basically held everybody in place," Mr Benjamin said, adding that the number of work-days for its Singapore office has been cut by four days per month in order to reduce costs.

Due to the Covid-19 pandemic, it is unlikely that FJB will be able to exit the SGX watch list by the required date of Dec 4, 2020. The company was placed on the watch list in December 2016 for sustaining pre-tax losses for more than three consecutive years and having an average daily market capitalisation of less than S$40 million for more than six months. The cure period for issuers placed on the watch list is 36 months, but FJB had been granted a 12-month extension in June last year.

FJB has warned that it would not be profitable this year. Before the Covid-19 nightmare, FJB's market value was hovering around S$30 million, but this has since fallen below S$20 million.

"So it is very unlikely we will be able to exit the watch list by December based on the current situation," said Mr Benjamin.

The group has consulted its advisers, and is in talks with the SGX.

"The idea is to remain listed. We see benefits in staying listed - being able to raise capital, being able to do placements. That's where we are. We may have some kind of extension from the SGX. If not, there will be other platforms we will consider. That's the plan," he said.

Mr Benjamin, who was named Ernst & Young's Lifestyle Entrepreneur of the Year in 2007, believes that that the retail sector in Singapore will survive, but a full return to normal - much less growth - will be difficult.

"When stores and restaurants open, hopefully before the end of June, there will still be social distancing and crowd control. Many people will still be frightened, and want to stay at home. It's going to be tough, and will take several months to gear up."

He reckoned the government will do more if needed in order to sustain businesses because "there is nothing worse than the food and beverage (F&B) and retail collapsing in our market". Singapore has about 260,000 small- and medium-sized enterprises (SMEs) employing more than two million people.

While the government has legislated that landlords unconditionally pass on property tax rebates in full to tenants, landlords must understand the dire situation facing their tenants too.

"We depend a lot on the tourists coming in, and we know that won't happen till end December at least. It is going to be tough. It is going to be tough for F&B, retailers, spa operators, night club operators, etc.

"I don't think the government can force landlords to bring down costs and rentals. I think landlords themselves must realise this. They know what our turnover is each month. At the end of the day, what do they want? Do they want tenants who are healthy and can pay their rents and lease their shops, or do they want tenants who are financially broke and ultimately empty their spaces?"

The chaos wrought by the virus has coughed up fresh opportunities for the nimble-minded company. FJB is putting new brands that it does not represent in the brick and mortar space online - something unheard of before.

"We have fast-tracked our online development. Today, we have many brands online. Besides, Casio and Superdry, we have Guess, Pretty Ballerinas, Rebecca Minkoff, etc. They are going online; and business has grown, maybe doubled, in the last two months," said Mr Benjamin.

Principals, who were previously resistant to FJB marketing their products online, are now more receptive to the idea. They have even allowed FJB to sell their products to other regional websites such as Zalora and Lazada. Home delivery will also continue to be part of FJB's channel of doing business.

"The way I see it, pre-Covid, online business was growing. It was between 3 and 4 per cent of the brick-and-mortar business. In the next 12 months, I see this growing to 5-7 per cent because everybody, including me, has bought things online the past few months, from food to weights to everything. People are now more used to it, and this channel will keep growing."

FJB is also looking to diversify from its fashion business. "We are basically looking at consumer-facing products, which consumers will now channel more of their disposable income into. We will make an announcement soon,'' he said.

"Going forth, business is not going to be the same. Everything will change - from the way we work, to travel, (to the way we) negotiate deals with our principals and business associates."

FJB will be closing its Tom Ford store at Marina Bay Sands in the coming weeks, and will not renew its franchise rights.

"At the end of the day, brick-and mortar will still be the majority and larger part of the business. That's important. The see and touch (and) feel. The online complements as an additional channel where you can do your marketing, click and pick, and promotions, etc. It is a facilitator and a new channel people are using.

"Bottom line, this is a business that is not going to disappear. You have to navigate differently. It is how you navigate correctly in this new norm."