South Africa’s leading fashion retailer, TFG, is hopeful about its prospects for the upcoming Black Friday and Christmas shopping seasons, despite reporting a 15.3% decline in half-year earnings.
TFG, which owns brands such as Foschini and Markham, said it was confident that its retail turnover growth in the second half would be higher than last year, and that its gross margins in its Africa business would improve.
The retailer, which also sells furniture, faced challenges in the first half due to high interest rates, inflation, and power cuts that disrupted its operations and forced it to clear excess inventory through promotions.
TFG’s Africa business, which accounts for more than 80% of its turnover, saw its gross margins fall by 2.5 percentage points to 39.5% in the six months ended Sept. 30. However, it still managed to grow its retail turnover by 17.3%, outperforming its peers. TFG’s London and Australia businesses, which were hit hard by the pandemic last year, also showed signs of recovery as demand normalized.
Overall, TFG’s group retail turnover grew by 12.4% to 26.4 billion rand ($1.41 billion) in the first half, while its headline earnings per share dropped to 393.6 cents from 464.6 cents a year earlier. TFG’s CEO Anthony Thunström told Reuters that he was optimistic about the trading conditions ahead of the festive season, but also cautious about the impact of power cuts, which resulted in 287,000 lost trading hours in the first half.
He said that if the frequency and duration of blackouts remained low, it would be a great benefit for November and December, especially compared to a very high base last year, when TFG had record results over Black Friday and Cyber Monday.
TFG expects customers to continue to seek value, which could drive further promotional activity in the industry. The retailer said it had the stock it needed, and the stores were ready to meet the demand. TFG is not the only South African retailer that is optimistic about the future, despite the tough economic environment. Its rivals, Woolworths (WHLJ.J) and Mr Price (MRPJ.J), also reported strong sales growth in the first half and said they were well-positioned for the second half.
South Africa’s retail sector has shown resilience in the face of the pandemic, as consumers shifted their spending from travel and entertainment to clothing and home goods. The sector also benefited from government stimulus measures and low interest rates.
However, the sector still faces risks from rising inflation, unemployment, and social unrest, as well as the uncertainty of the pandemic. TFG said it would continue to focus on its strategic priorities, such as digital transformation, customer loyalty, and sustainability.
TFG, which has more than 4,300 stores across 25 countries, said it would also pursue growth opportunities in new markets, such as the Middle East and Eastern Europe, where it recently acquired two online platforms. TFG’s shares closed 1.6% higher on Friday, outperforming the Johannesburg Stock Exchange’s general retail index, which was up 0.6%.
Source: Reuters
