TFG, owner of Foschini, Jet and American Swiss, has warned it will swing into a diluted headline loss per share of between 78.6c and 131c for its half-year to September, compared to diluted headline earnings per share of 526.9c previously, saying new lockdowns in the UK and Australia will continue to dent profits.
The clothing group is considered one of SA’s most successful clothing retailers locally and abroad. Unlike many SA companies, including Woolworths and Truworths, that have lost billions in their forays abroad, TFG has profitable UK and Australian businesses.
TFG warned, however, that new restrictions abroad to contain Covid-19 are “adversely impacting trade” and that its UK business recovery “will be slower than originally anticipated”. In the financial year 2020 the unit contributed about 19% of revenue.
Its UK clothing brands, Hobbs, Phase Eight and Whistles sell formal workwear and evening wear, for which demand has dropped due to lockdown restrictions.
In its annual report, TFG described the UK as a “tough market” even before the coronavirus pandemic, with earnings already down 0.8% in the 11 months to February and by 4.5% to its March year-end.
In the trading statement, TFG said nearly all of its 4,083 outlets were closed in April in Australia, the UK and SA. Closer to home, from May, 80% of SA and stores in the rest of Africa were reopened, but trade has been “volatile”.
Regional UK stores, closed on March 23, reopened in May and June with “significantly lower than usual levels of footfall”. The company did not open stores in its UK city centre locations until October, as commuters and tourists were slow to return to these areas, especially central London.
The group warned new lockdowns in the UK and Australia will affect it well into its “second half of the financial year” to end-March.
In the UK business turnover fell 22.9% in pound terms from March 1 to March 14, while turnover plunged 94.7% between March 15 and March 28.
The group said in a statement it was “cognisant of the current retail challenges in the UK”, where it is reviewing its cost base and business model. Its UK online sales were only up 1.6% in the half-year to September, despite many consumers shopping online during the pandemic.
TFG previously told the market it was negotiating shorter leases and turnover-based rental in the UK.
All of its 534 stores in New Zealand and Australia were closed in April but had reopened by the end of May. In New Zealand, however, 17 stores were recently closed again for two weeks due to new fears about the coronavirus.
It said 83 stores in the state of Victoria, where Melbourne is situated, have been closed in a strict lockdown from August 2 and will remain so until at least the end of October. Despite this, TFG has not had to borrow money in Australia where it is cash positive.
Before the new closures, in Australia it had recorded its highest earnings before interest, tax and depreciation in July.
TFG CEO Anthony Thunström, said although turnover and earnings were affected by the Covid-19 pandemic “we remain humbled by the continued support of our shareholders”.
The company’s August rights offer of R3.95bn was oversubscribed. In a statement the group said the money raised will “insulate the balance sheet during this time of global economic uncertainty and allow us to further execute on the company’s growth strategy”. Thunström said the group is still looking for acquisitions.
Shares in TFG closed 2.4% higher at R97.73 on Friday, with its gains for the week amounting to about 7.5%.
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