Retailing group TFG, the owner of popular South African stores like Foschini, Markham, @home, sportscene, DueSouth, RJ and Fabiani, seems to be having great fun in its new overseas ventures, in the UK and Australia. Its retail turnover jumped 21.4% to rest at R28.5 billion during the financial year ended March and profits were significantly up too in a performance boosted by offshore operations.
TFG now boasts an international footprint that spans 4034 outlets in 32 countries –touching Africa, Europe, the Americas, Australia, Middle East and East Asia. This growth pattern matches those of other first tier South African retailers service firms like Woolworths, Spar, Pepkor, Netcare, Medclinic, Investec etc in a path with mixed fortunes.
The group notes that retail turnover growth was underpinned by a 23,5% (GBP) growth for TFG London and 6,3% (ZAR) growth for TFG Africa. The balance came from TFG Australia. TFG acquired Australian menswear brand RAG, in July 2017. And it acquired UK womenswear brand Hobbs in November.
The Group’s gross margin improved to 52,5% at March 2018, up from the 49,7% in the previous year, driven both by the expansion in TFG Africa’s gross margin from 46,4% to 47,8% together with the recent acquisitions of RAG and Hobbs.
TFG CEO Doug Murray notes that the group has overcome challenging economic and political conditions at home and abroad. “It was particularly gratifying for TFG Africa to have achieved gross margin expansion in all merchandise categories, with the exception of cosmetics, during a tough trading period which was characterised by unusually high levels of discounting across the market. The strong performance of our clothing category within Africa is particularly pleasing,” said Murray.
He noted that the retail turnover growth was underpinned by a strong 29% growth in clothing turnover. Jewellery, and homeware and furniture turnover, increased by just less than 1%, while cosmetics and cellphones were down 2,4% and 0,2%, against a backdrop of significant discounting and product price deflation respectively.
Murray said “Our international acquisitions, strong growth in Africa, focus on cost control and optimal capital allocation, together with our portfolio of brands from value to upper end, have enabled us to deliver robust returns for our shareholders under difficult conditions.”
He said “E-commerce continues to be a strategic focus area,” said Mr Murray. “In the past year the Group has brought @homelivingspace, Exact, Foschini and SODA Bloc online, offering a cybershopping experience of 20 TFG brands. The Group’s online turnover contribution has grown from 5,4% to 6,5%.”
Group credit turnover growth of 5,3% was driven partly by the growth in active accounts. “This was in line with expectations, as the negative impact of the Affordability Regulations is now in the base,” said Murray.
The Group added 602 outlets this financial year as part of the TFG Australia and Hobbs acquisitions. TFG opened 281 outlets ‒ 146 in TFG Africa, 91 in TFG London and 44 in TFG Australia. It closed 177 underperforming outlets (83 each in TFG Africa and TFG London, 11 in TFG Australia). Net trading space in African operations increased by 3,5%.
Murray said the group remains cautious about the economic and political outlook, both in South Africa and abroad. UK uncertainty about the Brexit negotiations, among other factors, continues to impact consumer and business confidence. Local prospects have improved with the appointment of President Cyril Ramaphosa.