TFG, owner of Sportscene, Totalsports, Jet and Sterns, believes it cannot let the stagnant economy derail its plans to expand, saying it doubled turnover over the past five years even as the SA economy had barely grown.
In a media briefing on Tuesday, TFG CEO Anthony Thunström outlined the company’s plans to open 1,000 new stores over the next five years, its continued investment in technological innovation to make online shopping seamless and reintroducing homeware to discount retailer Jet.
While admitting SA’s macroeconomic climate was weak, he said the company, which is successful in Australia, had chosen not to “become preoccupied with that”, but instead see opportunity in SA.
“The reality is there is a lot of opportunity for our business,” he said, adding that had it based plans on the economy growing about 1% a year, it would have also grown at that rate.
Apart from during the Covid-19 pandemic, the company has opened about 200 stores a year and plans to get that back on track as the spread of the virus slows and lockdown restrictions ease.
Thunström also believes the cash-rich informal economy is hugely underestimated and TFG has plans to expand some brands, especially Jet, to smaller towns.
The best estimate it could find of the informal economy’s strength was R300bn a year in a recent study, he said.
In SA, TFG is positioning itself for 20% of its sales to come from online orders within three to four years, and recently bought a company that designs mobile apps just to gain access to their skilled staff, as it improves its online shopping experience. Most South Africans access the internet using smartphones.
This is the first time it has bought a business for the sole purpose of gaining access to a group of highly skilled staff.
Thunström said online sales in Khayelitsha in Cape Town matched those to the wealthy Atlantic seaboard and it is a myth that online shopping is only popular in suburbs.
It has 60,000 of its 180,000 styles online with plans to increase that number as its tech capabilities improve.
The idea is to use online to offer “infinite choice” to consumers at any time with its multiple brands, and then rely on its 3,000-store network for customers to collect in-store.
In SA, click-and-collect is more popular than delivery, which is also on offer.
TFG is investigating whether it will use zero-rated apps, which do no consume the customers’ data. These are used by smaller retailers such as Homechoice, a company that sells bedding and homeware to the township market.
TFG says its online business is already profitable and its advantage over online-only sellers is that it has an existing customer base from which to draw.
TFG had a tough 2021 abroad, making its first-ever loss.
Its rights issue in 2020 raised R3.8bn and reduced gearing from over 50% to just over 7.6%.
Thunström admitted the UK gave him “sleepless nights” and the company closed more than 200 of its 900 stores. But he says it is seeing a better performance as the UK is back open for business.
As the world looks to diversify supply chains after Covid-19 made retailers wary of a sole reliance on China, TFG feels well positioned thanks to its investment in local manufacturing where it produces 70% of its clothing, excluding cosmetics, shoes and accessories. It bought House of Monatic, a Cape Town-based local manufacturer in March this year as the company was on the brink of collapse.
TFG employs 3,000 people in its manufacturing business while another 2,000 work for suppliers that sell mainly to it. Last week it announced the purchase of bedding chain Granny Goose, together with its manufacturing arm that specialises in soft furnishings.
Trade, industry & competition minister Ebrahim Patel has asked retailers to give a boost to local manufacturing, but TFG was ahead of the game when buying former supplier Prestige.
The business case for local manufacture is the just-in-time design, allowing it to manufacture clothes and have them in store within 42 days, based on what is selling well at the time. This leads to more full-price sales as it does not have to be guessing six months in advance what may sell, something it needed to do when placing orders in the East.
“You don’t want to be around the year you get it wrong,” said Thunström.
Suppliers in SA can see what is selling well every Monday morning and are therefore able to change designs accordingly.
The group said it is not under any illusions about SA’s weak economy. CFO Bongiwe Ntuli said TFG has been focused on stealing market share and it had continued to do that each year.
She said Black Friday would be popular again this year. “It gives people an opportunity to get a bargain,” which many are looking for in the current climate.
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