House

“The brand has been successfully repositioned in the face
of several new entrants into the homewares market.”
 

Financial highlights and statistics           2003  2002  Operating profit before interest and before allocation of net costs of support structures A$’000  R’000  2 257  11 548  2 301  12 768  Number of stores at year end          Company owned   1  –     Franchised   90  82  Franchisee sales A$’m  89.6  68.5    R’m  459.5  380.1  Franchisee fees A$’000  3 632  2 949    R’000  18 584  16 363

Positioning
House is the largest national homeware and giftware retailer in Australia and is targeted at the middle to upper income market. The brand has been in the New Clicks stable since December 2000 and currently operates 90 franchised stores and 1 company-owned store.

Review of the year
Following the appointment of Simon Dryden as brand leader and a restructuring of the brand team, House has been successfully repositioned by creating a differentiated offering in the face of several new entrants into the homewares market.

The new positioning, together with increased marketing activity and an enhanced merchandise range, has given the brand the desired boost.

Eight new franchise stores were opened, while one store was acquired from a franchisee who was experiencing difficulties. House is now operating this store and should benefit when the store is sold in the forthcoming year.

House posted a 23% increase in franchise fees, as a result of new store growth and a 31% increase in franchisee sales to A$89.6 million. The 1.9% decline in operating profit from A$2.301 million to A$2.257 million is largely attributable to the sale of two company-owned stores in 2002 for an amount of A$600 000.

The operating profit from the retail component of the business grew by 32.7% to A$2.3 million.

Trading conditions in the homewares market have become increasingly difficult owing to the proliferation of new players and to a general slowdown resulting from the downturn in the housing market.

The buying function within House has experienced substantial change, with a revised merchandise strategy, improved supplier relationships and an improved communication strategy to the franchisees.

This new merchandise strategy has been embraced by all franchisees with the impetus created from some extensive research that concluded we should return to our core business of kitchen and dining.

Our own imports programme has experienced many changes with positive results. Changes within merchandise selection, improved financial controls and better service have found wide acceptance from the franchisees. The programme is now well supported and will become a revenue earner in the future.

An association has been formed with the Lifestyle Channel, a cable television programme, which will increase the franchisees’ advertising budget by A$1.3 million. This is being funded by suppliers and is a first for the homewares industry.

House also received the prestigious Global Innovator Award for the best homeware retailer in Australia with more than ten stores. House will now compete as the Australian representative in the World awards to be held in Chicago, USA in May 2004.

Strategy
The brand will continue to focus on its core business, aimed at being a leading kitchen and dining retailer. The new positioning has been adopted to stimulate interest in the brand’s inspirational homewares range.

Key strategic relationships have been developed with suppliers to differentiate the offering, while improving margins for franchisees and the brand. This has also enabled House to fund the “Houseguests” pay television programme, a lifestyle magazine and recipe cards from those suppliers.