Fashion retailer TFG says shareholders should brace for a weaker year ahead as its sales continue to grow but profits take a knock from its strained overseas businesses.
Trading conditions in London and Australia have proven to be more challenging than expected with macroeconomic conditions showing little improvement, it said.
Group sales increased 7.5% in the year to date and 2.9% in the third quarter, helped mainly by the inclusion of UK brand White Stuff, which TFG acquired in October 2024. Excluding White Stuff, sales growth was far more modest, at 2% for the nine months and 1.8% in the third quarter.
Online sales were a bright spot, jumping 36.6% for the year to date and 23.4% in the third quarter, now making up 14.3% of total retail sales.
Even with this growth in sales, profits are under pressure. TFG said it expects impairments of up to R750m, mainly linked to its overseas operations. As a result, earnings per share (EPS) for the year to end-March are expected to be at least 20% lower than last year. Headline earnings will not be affected by the impairments.
At home, trading conditions remain tough as consumers continue to feel the pinch, even though inflation has eased and interest rates have started to come down.
TFG Africa sales grew 3.5% in the third quarter and 4.2% for the year to date. The group gained market share in homeware and furniture and held its position in apparel.
Homeware, furniture and beauty performed strongly, while clothing growth was modest and cellular sales declined slightly. Online sales in TFG Africa surged nearly 55% in the third quarter, driven by the Bash platform.
In the UK, total sales rose due to White Stuff, but the underlying picture was weaker. Excluding White Stuff, TFG London sales fell 2.4% in the quarter and 2.6% for the nine months as UK consumer conditions remained difficult. TFG said this has forced a reassessment of future cash flows, leading to a partial impairment of the Phase Eight brand.
Australia also remained under pressure, with sales falling 2.6% in the third quarter. TFG said weak consumer demand and changes within its brand portfolio are likely to result in impairments to the Tarocash and yd. brands.
The group said the medium-term outlook is more positive as lower inflation and interest rates begin to support consumer spending.
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