Does Steinhoff Face Total Collapse?

Strategy Briefing

About This Report

Jan 2018

Shares for publicly listed Steinhoff International Holdings Ltd (“Steinhoff”) went into free fall in early December 2017, following the resignation of its CEO, as well as the company’s decision to delay 2017 results and to launch an investigation into alleged accounting irregularities. To avoid total collapse, Steinhoff may need to divest assets in order to stay afloat, but first the company is tasked with proving that assets are correctly valued.

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Does Steinhoff Face Total Collapse?

Steinhoff’s wide global reach due to acquisition activity

Steinhoff International Holdings Ltd (“Steinhoff”) has performed impressively in recent years, surging from being the 39th ranked home and garden specialist retailer globally in 2009 to being ranked sixth in 2017. The company has retail operations in several regions, including Australasia, Eastern Europe, Western Europe, NorthAmerica and the Middle East and Africa, due to its acquisition activity.

Accounting investigation sends Steinhoff shares in to free fall

The resignation of its CEO (Markus Jooste), as well as the company’s decision to delay 2017 results and to launch an investigation into alleged accounting irregularities has sent Steinhoff’s share price into free fall, losing more than 80% of its value in a matter of days.

Lack of financial transparency adds more fuel to the fire

Steinhoff has released few details following the CEO’s exit, which has created further uncertainty. The company has stated that 2016 results will need to be restated; however, it has yet to confirm if this applies to both South African and international subsidiaries.

Negative conclusion to lenders meeting impacts share price again

Lenders were expecting clarity on whether only 2016 results need to be restated;however, Steinhoff’s failure to provide further information during the 19 December lenders meeting has exerted further pressure on the company’s share price.

Asset disposal a likely future scenario for Steinhoff

To avoid total collapse, Steinhoff may need to divest assets in order to stay afloat.However, Steinhoff is now tasked with proving that assets are correctly valued,therefore, asset disposal is unlikely to be a straightforward process.

Introduction

Scope
Key findings
Steinhoff International Holdings Ltd: Key company facts

M&A Activity Boosts Global Reach

Steinhoff: A South Africa-headquartered furniture empire in the making
Steinhoff’s home and garden acquisitions boost revenue
Steinhoff’s geographic expansion through acquisition activity

Share Price Plunge

Steinhoff’s share price plunges after CEO’s prompt exit
Steinhoff’s woes deepen amid accounting scandal
Steinhoff’s zealous expansion tactics: A winning or losing strategy?

Future Outlook

Steinhoff’s planned store expansion grinds to a halt
Lenders meeting a crucial step for Steinhoff
Asset disposal a likely scenario for Steinhoff to avoid total collapse

Report Definitions

Definitions