Homeware and fashion retailer The Foschini Group (TFG) estimates that rampant load shedding reduced TFG Africa’s retail turnover by about R1.5 billion under the increased frequency and extended hours experienced during stages 5 and 6.
In a trading update for Q4 FY2023 and the twelve months ended 31 March 2023, TFG revealed that the ongoing energy crisis and elevated load shedding levels significantly impacted its operations.
Despite TFG reporting that 75% of its turnover in South Africa is protected from the impacts of load shedding due to the group’s investment in alternative power solutions, the group said that running independently from Eskom is still proving costly.
“Capital expenditure of R200 million has been spent on alternative power solutions to date, which under normal circumstances, would have been invested more constructively in further expanding our store base as well as other strategic capital projects,” said the group.
TFG estimates that the operational and financial impacts of load shedding have reduced TFG Africa’s retail turnover in excess of R1.5 billion in FY2023.
Compounding the losses released was the decline in footfall and trading hours as a secondary effect of the power cuts.
“TFG Africa lost, conservatively, 360,000 trading hours during the twelve months ended 31 March 2023. However, the true impact has been estimated at more than double this figure at around 730,000,” the group added.
Despite more challenging trading conditions across all regions, the group sustained pleasing retail turnover growth into Q4 FY2023, delivering retail turnover growth of 14,3% compared to a solid base during the same period in FY2022, including:
- TFG Africa recorded retail turnover growth of 15.6% (6.0% excluding Tapestry) in Q4 FY2023, compared to Q4 FY2022, which was negatively impacted by the high levels of load shedding experienced in Q4 FY2023;
- Cash retail turnover growth for TFG Africa in Q4 FY2023 of 17.8% compared to Q4 FY2022. Cash retail turnover for Q4 FY2023 now contributes 74.5% to the total TFG Africa retail turnover and 82.5% to the entire group retail turnover; and
- TFG continued to grow ahead of the market during Q4 FY2023 and the twelve months ended 31 March 2023, further expanding market share by 0.3% in respect of both these periods for those categories reported.
The year ahead, however, is expected to remain challenging, especially for the South African business where load shedding and increasing consumer pressure are expected to worsen, the group said.
Despite the group’s high level of conviction around several clearly defined and identified growth levers and organic investment opportunities, the group, in light of the current load shedding and global economic uncertainties, is adopting a very prudent approach and treating FY2024 as a year of consolidation and focusing on improving operating leverage, it added.