TFG, one of SA's biggest retailers, says it will close stores in malls with low footfall if it can't achieve fair rental deals with landlords when leases come up for renewal.
The owner of the Foschini, Markham, Totalsports, American Swiss and @home brands says this applies to stores at shopping centres where there has been a dramatic drop in foot traffic and revenue due to the Covid-19 pandemic.
In an interview after the release of annual results to end-March, TFG CEO Anthony Thunström said: "As leases come up for renewal [we will] evaluate, on a store-by-store basis, how the store is trading and what the proposed rental would be versus the turnover we think we can do in the store. If we can't get to agreement on a win-win rental agreement then yes, we would close stores. Nobody can afford to have loss-making stores."
The tough trading environment in SA is already resulting in store closures.
"Nobody is looking for more space . Everyone is trying to shed space. And then you have Edcon [which is in business rescue and trying to find a buyer for parts of the business] and what's happening there is going to either way result in less demand for space.
"It doesn't suit either retailers or the landlord to have lots of boarded-up shops. The minute that starts happening, everyone is negatively impacted."
Thunström said TFG's negotiations with property owners will take a long time as it has more than 1,000 landlords in SA alone.
He said the retailer has no intention of renegotiating rentals on existing leases in centres where foot traffic and revenues are looking good. Renegotiations will be required in malls where turnover is substantially down, for example in large malls that rely on tourism.
He said the group has thus far received "largely positive" responses from landlords, including some who, "unsolicited", have offered the retailer up to three months' zero rental. In some cases TFG declined this, instead continuing to pay the existing rentals, especially if the stores in question had been trading well.
"At the other extreme you have landlords suggesting 100% rental even though they themselves admit their footfall in their malls is down more than 30% or 40%. This simply isn't feasible."
He said the group, which employs 22,000 people in SA, is also doing everything it can to safeguard store employees' jobs.
"Even at the height of the lockdown we still paid our staff in full. It was a very conscious decision. It's the right thing to do."
TFG is also planning ahead. The group announced a R3.95bn rights offer to partially pay down debt of about R8bn and to invest in its e-commerce platform and its local manufacturing division.
Though there is no urgent need for the rights issue, Thunström said the group decided it was wiser to proceed with it now, "especially as we have clearly defined organic growth opportunities that will assist the future growth of the group and that require further investment to ensure that the full benefits are realised".
Though the group is not on the prowl for new acquisitions, he said, the rights issue will ensure it has "dry powder available" if an opportunity that "fits into our stable" comes along.
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