TFG, the owner of Foschini, Markham, Jet and @home, has decided to focus on consolidating its businesses and slow down store openings in SA
This is as the group reports reduced sales in UK and Australia in April. It is facing a weaker consumer in the UK and in SA, along with extensive load-shedding at home.
Given the sluggish consumer environment in SA and sustained load-shedding, it has frozen administration expenses amounting to R220m, curtailed planned new store openings and will focus on consolidation.
“The future brand and store rollout pipeline remains strong, but market conditions require a slower execution,” it said.
In the past two years, TFG has been expanding in SA and bought Jet followed by Tapestry, which includes the Volpes and Coricraft brands and their manufacturing facilities.
In 2021, it bought the Granny Goose bedding retailer and manufacturing facilities. It also bought House of Monatic, a men’s wear manufacturer.
In 2022, it launched Jet Home and its Bash website to sell its multiple brands online, including sneakers, jewellery, kitchenware, bedding and jeans.
But it is now facing a tough environment and issued an usually subdued trading update.
TFG said it faced strong headwinds during the January to March period due to heightened consumer pressure, with like-for-like clothing sales in SA growing 0.8% and homeware 1.9%. Total SA growth, including new acquisitions was 15.6%.
This slowing growth is in line with declining sales reported late in 2022 by Ackermans and Mr Price.
TFG has been the one SA clothing brand that has managed to succeed abroad. Since its year end in March it has seen declining sales in the UK and Australia, though it says this is off a high base when shoppers in 2022 returned to stores after the pandemic and engaged in back-to-work shopping.
In April, TFG London and TFG Australia experienced negative retail turnover growth of 14.3% and 3.6%, respectively.
TFG said it had excess stock in all three territories and had to increase promotional activity across various markets, placing pressure on its profit margins.
TFG Africa reported 12.5% retail turnover growth in April, or only 3.2% excluding its new Tapestry acquisition, which was not included in the base.
“TFG is treating 2024 as a year of consolidation, with a focus on improving operating leverage.”
It expects to purchase less stock than in 2023 to reduce working capital expenditure and improve gross profit margins.
It is investing in alternative power solutions, such as battery backup power, in SA helped to reduce the effect of load-shedding. However, its batteries are not as effective during stage 5 and 6 load-shedding. About 75% of its stores, which include the sportscene, Total Sports, American Swiss and Fabiani brands, have backup power.
Its share price closed 0.17% lower at R88.87 and is down almost 15% year to date, dropping just more than 18% in the past six months.
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