R1.5 billion lost to load shedding – at just one company
The Foschini Group (TFG) says load shedding weighed heavily on its operations for the twelve months ended 31 March 2023.
TFG said that it recorded approximately 360,000 trading hours due to load shedding – however, this is a conservative estimate, with the group noting that the figure could be as high as 730,000 hours lost.
This is because customer demand was significantly dampened by the associated disruptions and inconvenience of load shedding, which can be seen in the reduced footfall.
The group said that the financial impact of load shedding has reduced its retail turnover in excess of R1.5 billion, with an associated impact on operating costs and inventory provisioning.
Although the group has invested in alternative power, which has slightly mitigated the effects of load shedding, they are far less effective during extended hours of load shedding seen during stage 5 and 6.
By the end of the reporting period, 1,875 stores had backup power, representing approximately 75% of the group’s retail turnover, with plans in place for the rest of the group’s stores to get backup power.
Overall, the group has spent roughly R200 million on alternative power solutions to date, which were unbudgeted for, with additional diesel and security costs also unbudgeted for.
The group’s financial results also took a hit due to load shedding.
Although the group’s retail turnover grew 19.4% to R51.8 billion (15.2% excluding Tapestry, which was acquired in August 2022), its headline earnings per share dropped 4% to 968.9 cents per share (FY22: 1 009.0)
Moreover, the group’s dividend dropped 54.5% to a final dividend of 150.0 cents per share.
Other group results are as follows:
- Retail growth was up 19.4% to R51.4 billion
- Revenue increased 19.4% to R55.1 billion (FY2022: R46.2 billion)
- Online retail turnover growth of 6.6% to R4,7 billion
- Group gross margin contracted 60bps to 47.9% (FY2022: 48.5%)
- Operating profit before finance costs increased 12.4% to R5.4 billion
- Profit after tax increased 4.0% to R3.0 billion
- Basic earnings per share increased 4,1% to 938.5 cents increases (FY2022: 901.9 cents per share)
- Headline earnings per share decreased 4.0% to 968,9 cents (FY2022: 1 009.0 cents per share)
- Cash generation from operations of R7.1 billion (FY2022: R8.2 billion)
Outlook
The group said that the upcoming year is likely to be extremely challenging, particularly for its South African businesses, due to load shedding and increasing consumer pressures.
In light of the difficult operating environment, TFG said that it would adopt a conservative approach to its treatment of FY2024 as a year of consolidation with a focus on improving operating leverage.
With higher levels of load shedding expected, their focus will shift to controlling inventory and defending gross profit margins by absorbing working capital, with FY24 inventory purchases being lower than FY23.
TFG said that trade since the year-end has been muted across all its trading territories.
For the two months ended May 2023 (compared to the same period a year prior), TFG Africa had retail turnover growth of 15.4% (5.8% excluding Tapestry), TFG London retail turnover declined 10.8% (GBP) whilst TFG Australia declined 4.9% (AUD).
However, results in TFG London and TFG Australia were up against a very high base from the comparative period as the end of Covid-19 lockdowns saw a heightened return for occasionwear and back-to-work shopping.
Read: The best retailer in South Africa – according to shoppers
Loading ...