The share price of TFG, the owner of brands such as Markham, Foschini, Sportscene, Jet, and Sterns, fell as much as 8.9% in intraday trade on Wednesday after it released a subdued trading statement late on Tuesday.
The shares of other clothing retailers were also down as load-shedding ramped up to stage 6. Consumer confidence and spend falls when blackouts worsen.
TFG was the biggest loser in its sector, however, and by the close it had fallen the most since June 2020 — when the country was in the throes of pandemic-enforced lockdowns — down 7.1% to R94.50.
TFG, said headline earnings per share (HEPS) for the six months to end-September will drop as much as 25% as a result of diminishing sales in all of its markets.
TFG owns a clothing business in Australia and women’s formalwear retailers in the UK, including Phase Eight, Whistle, and Hobbs.
The JSE mandates that listed companies inform the market once they know their earnings will deviate by 20% or more from the previous financial reporting period.
TFG directors sold a combined R6.9m worth of shares in July suggesting they, too, were worried about a drop in sales.
TFG attributes the sales decline to several factors. Offshore sales are coming off a high baseline in 2022 when customers in the UK and Australia increased their shopping as Covid-19 lockdowns ended.
All the countries in which TFG operates are grappling with higher interest rates, reducing consumers’ disposable income. Increased interest rates are also increasing the company’s cost of debt, which includes funding for its R2.4bn purchase of Tapestry, the owner of Coricraft, Volpes and Dial-a-Bed stores and factories.
In SA, persistent load-shedding hindered sales, TFG said, with consumers less likely to shop during the rotational blackouts.
TFG expressed concerns about the lasting effects of continued load-shedding on economic growth, saying that it could worsen the challenges of small businesses, unemployment, consumer spending, local supply chain partners, and the overall retail sector.
TFG said that in the 22 weeks to August 26, sales in SA rose 16.1%. But like-for-like growth was just 3.3%. Revenue in Australia increased by 1.7% and by 3.7% in the UK, contributing to an overall sales increase of 11.3%.
TFG didn’t provide information on price inflation, which is crucial in determining whether sales growth is driven by price increases or higher sales volumes.
Other SA retailers, including Woolworths, Ackermans, Truworths, and Mr Price have reported lower same-store sales in 2023 compared with a year earlier, and that is likely to be the case for TFG locally too. Moreover, its same-store sales rose just 3.3%, which suggests price inflation rather than increased volumes.
The weeklong taxi protest in Cape Town at the beginning of August resulted in a sales drop of R11m at TFG brands. The Tapestry brands reported a R9m decline in turnover.
TFG estimates its HEPS, a main profit measure in SA, will drop 15%-25% to 348.5c-394.9c
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