Truworths has been given the green light by competition authorities to acquire a clothing manufacture in Cape Town, as more local fashion retailers are trying to increase their local production capacity.
The Competition Tribunal said on Tuesday that it has conditionally approved the acquisition of Barrie Cline Clothing by a Truworths subsidiary called K2020. According to the Competition Commission, which recommended in September that that the Tribunal approve the transaction without conditions, K2020 is Truworths' special purpose vehicle that does not have any business activities yet.
While Truworths did not mention anything about this new subsidiary in its recent results presentation or its integrated report for the year ended in June, the fashion retailer it mentioned that in the medium-term, it wants a higher proportion of its ladieswear to be produced in-house. It said one of its objectives for 2021 was to expand its in-house manufacturing capacity and infrastructure. The retailer also wants to increase its focus on ladieswear.
Taking control of Barrie Cline, which exclusively manufactures and supplies women’s outerwear apparel for Truworths, might be the first step towards that 2021 goal. The Tribunal said upon implementation of the merger, K2020 will exercise sole control over Barrie Cline.
Currently, about 45% of Truworths' apparel is manufactured locally and the company wants to increase this so that it can respond more quickly to fast fashion trends and customer buying patterns.
"Local supply offers shorter lead times as suppliers can respond quickly to replenishing popular selling styles during a season," wrote Truworths in its integrated report published last month.
Analysts have in the past pointed out that Truworths' competitor The Foschini Group's local manufacturing capability was giving the retailer a competitive edge over its peers.
The only condition that the Tribunal imposed on the transaction was that it should not result in any merger-specific retrenchments for at least one year after its implementation.