One of South Africa’s biggest retailers takes a hit – with more stores closing

The Foschini Group (TFG) has reported a drop in headline earnings for the six months ending September 2024 with sales declining and net store closures across its territories.

However, the group is seeing continued growth in its online segment, driven by huge demand in South Africa.

Group revenue was down slightly by 1.4% to R27.98 billion (from R28.36 billion before), but the cost of turnover was also down, leading to a record gross profit of R12.8 billion.

Despite this, profits after tax were still down 4.3% at R1.2 billion for the period (from R1.25 billion in the prior period).

Headline earnings per share were also 5.6% lower at 371.6 cents (2023: 393.6 cents).

The group declared an interim dividend of 160 cents per share – up 6.7% from 2023.

Commenting on its performance over the six months, the group noted that sales declined due to difficult trading conditions in all its territories and were impacted by the high clearance-driven sales base in TGF Africa in the comparative period.

However, the group has noted an improvement in trading activity across its territories after the reporting period (September to November 2024).

Across its main segments, TFG Africa’s revenue grew by 0.6%, driven largely by sales growth of 11.6% in cosmetics and 6.1% in homeware.

The South African business has also extended its beauty offering, which was previously concentrated in its Foschini business, across more of its 26 brands in South Africa. The Africa business unit reported gross profit increasing by 6.6% to a record R7.6 billion.

TFG’s London business was significantly impacted by inventory delays due to Red Sea disruptions, high inflation and elevated interest rates.

The group recently finalised the acquisition of UK retailer White Stuff, which gained 100% of the lifestyle brand for GBP51.7 million – or around R1.1 billion.

TFG Australia also suffered from the impact of persistently high inflation and elevated interest rates, with consumers continuing to remain under pressure, impacting demand.

The group also pointed to its strong online and digital presence, where group online sales grew +9.9% to R2.8 billion, contributing 10.7% to total retail sales.

The growth is largely attributable to growth of 47.9% in South Africa via its Bash platform.

However, despite the online successes, the group’s physical store presence is getting smaller, with a net 46 store closures across its portfolio – 58 new stores, versus 104 stores closing.

At 30 September 2024, the Group traded from 4,720 stores in 23 countries, down from 4,766 stores.

TFG Africa is seeing the most new openings, with 34 stores opened over the period, but 45 stories closed (net 11 closures). TFG London saw the most closures (53) with only 14 new openings.

On a net basis, this is likely to change as the White Stuff stores get counted in the UK operation.

White Stuff has 113 stores and 46 concessions in the UK. The business also operates 6 stores and 25 concessions across Europe. This will not be reflected in the TGF Africa segment, however.

Outlook

The group said that it will continue to invest in its current business model.

In South Africa specifically, the outlook is positively buoyed by the formation of the Government of National Unity, suspension of load shedding and establishment of the two-pot retirement system.

“Sales in TFG Africa for the 5 weeks ended 2 November 2024 have been 8.3% higher,” it noted.

Read: South Africa’s TFG buys major UK retailer