Clothing and homeware retailer TFG has had sluggish growth in its SA brands — excluding its new discount retailer, Jet — with April to June sales up 4%, compared with the same period in 2019, suggesting that its existing brands are struggling to see real growth.
In a three-month trading update, the retailer compared April to June 2021 with April to June in 2019, because it is a better comparison than the same months in 2020, when all SA stores were closed in April in the first hard lockdown.
The three-month update shows revenue in TFG Africa business was up 26.4%, a figure than includes the turnover from discount retailer Jet, which it purchased in September 2020.
TFG’s acquisition of Jet’s 425 stores in September 2020, which lifted revenue in the year to end-March by about 13%, continues to boost its turnover, allowing it to compete in the discount space dominated by Mr Price, Pep and Ackermans.
But excluding Jet sales, all other brands grew 4%, suggesting that businesses such as The Fix, Exact, Totalsports, American Swiss, Foschini and Sportscene are not appealing to new consumers and sales remain flat.
Credit extension in SA is tight as the retailer remains concerned that “uncertainties around further Covid-19 outbreaks, extended lockdowns and the slow pace of the vaccine rollout adversely [impacts] consumer confidence”.
TFG also remains concerned about muted spending after the July looting. “The recent civil unrest has and will continue to impact consumer spend and business confidence, especially where businesses’ ability to trade has been hampered through the widespread destruction in the affected areas of KwaZulu-Natal and parts of Gauteng,” it said.
The update shows consumer spending still reflects a Covid-19 lifestyle, with a focus on work and socialising at home. SA customer spend on homeware, technology and casual clothing rose. Cosmetics, formal clothing and jewellery sales dropped.
Growth in cellphone sales was up 18% from the same period in 2019, while jewellery dropped 11.9% and cosmetics was down 13.6%. Homeware revenue was up 13.9%.
FNB wealth and portfolio manager Wayne McCurrie said the 4% drop was “not a bad” result given the pandemic has led to a drop in demand for jewellery, cosmetics and formal clothing.
Sales in the UK operation slumped 35.9%, compared with the same quarter in 2019, after TFG permanently closed 230 stores. It has struggled in the UK, impairing R2.7bn in investment in June as its Phase Eight, Whistles and Hobbs brands, which sell ladies formal wear, lost relevance during the UK’s repeated stringent lockdowns.
But TFG said UK sales outperformed expectations in July, when UK ended its lockdown. By June, only one concession store in a larger shop remained closed. It has lost 55 concession stores from trade as they were situated in the more than 200-year-old department store Debenhams, which shut down permanently in May.
The company’s stores in Australia remain a rare success story after most SA companies that ventured Down Under, including Woolworths and Pick n Pay, have struggled. Revenue was up almost 33% compared with the same quarter in 2019, even as the state of Victoria had a lockdown.
In Victoria, 96 stores were closed in a full state lockdown for seven days, with a further 84 stores closed in metro lockdowns for another seven days. At the end of the quarter, TFG Australia traded from 565 outlets.
TFG’s share price dropped 0.6% to R153,99 on Monday.
Update: August 2 2021
This story has been updated with new information throughout.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.