Clothing manufacturer and retailer TFG will invest about R200m to deal with persistent load-shedding, which cost it “at least” R400m in revenue in the six months to end-September.
The owner of Foschini, Markham, Jet and Fabiani will install backup power and deploy mobile point-of-sale devices after losing almost 132,000 trading hours to rolling national power cuts, CEO Anthony Thunström said at the group’s interim results presentation on Friday.
The measures include rolling out Tesla Powerwalls — a lithium-ion battery, inverter and remote monitoring system — in stores in a bid to secure 68% of its turnover from SA stores before Christmas.
“Not taking these measures isn’t an option,” Thunström said, adding that the blackouts eroded more than R200m in profit.
SA has experienced some of the worst power cuts on record so far this year as Eskom battles an ageing and poorly maintained power generation fleet. According to TFG, it lost 2.6 times more trading hours due to load-shedding compared with the same period a year earlier.
Many shopping malls provide power only for common areas such as toilets and food courts, and individual stores must provide their own generators or backup electricity to prevent shutting during load-shedding.
TFG — which also owns @home, American Swiss, Dial-a-Bed, Sportscene and Totalsports — is speaking to landlords about installing solar and backup power in their buildings.
“If there is heavy load-shedding and if the centre and other tenants don’t have backup power, there is definitely a drop-off whether your store was lit up or not,” Thunström said.
“Where we’ve had power, we’ve become the centre of attention of the mall and people have collected around our stores,” he added. Still, turnover dropped about 30%-40% during load-shedding, he said.
Like most retailers, shopping for the festive season — which runs from mid-October to the end-December — is vital for profitability. The period, which includes Black Friday, accounts for about one-quarter of annual group turnover, Thunström said in an interview with Business Day on Friday.
For the review period profit leapt 44.3% to R1.49bn, while group revenue rose almost a quarter to R25.1bn, prompting TFG to declare an interim dividend of 170c, unchanged from a year earlier.
Most turnover was generated from clothing (83.16%), followed by homeware (6.44%), cellphones (5.8%), jewellery (2.71%) and cosmetics (1.89%).
Most revenue was generated in SA (62.54%), followed by Australia (16.78%), e-commerce (8.3%), the UK and Ireland (7.2%).The remainder was from the rest of Africa and elsewhere.
Asked about Amazon coming to SA and whether TGF would consider selling some of its products via the world’s biggest online retailer, Thunström said TFG had tried it in the past but the results were “underwhelming”.
“Amazon has a lot of things. Clothing so far has almost been the one category they haven’t really cracked. They do reasonably well, but typically not as well as the vertical brand owner if you do it properly,” he said.
TFG aims to launch the full version of Bash, its new e-commerce platform that will host all the retailer’s brands, by April 2023 to compete with the likes of Amazon and online fast-fashion behemoth Shein.
“Our ambition is to take what is now a R1.3bn SA online business and grow this to a R10bn business,” Thunström said.
Financial Mail reported in September that Amazon appears set to launch retail operations in SA early next year.
Update: November 13 2022
This story has comment from CEO Anthony Thunström and new information about TFG’s plans for backup power.
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