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Foschini owner TFG has warned interim earnings could fall by up to a quarter as the effect of a post-pandemic spending recovery internationally created a high base in the prior year, while intensifying load shedding brought increasing pressure to bear.
The company - which owns brands such as JET, Sportscene and Totalsports - said on Tuesday that it had previously flagged that the results of its international operations had been positively impacted by the "inflated post-Covid-19 spending recovery", making the earnings for the six months to end September 2022 "unsustainably high".
During the current six months to end September 2023, the international operations had returned to growing off pre-Covid-19 levels. Because of this, as well as intensifying power interruptions that were disrupting its South African operations, the company said earnings were expected to come in 15% to 25% lower than the same period last year.
The company also gave an outline of expected performance for the 22 weeks to 26 August 2023, showing that its group topline growth was still increasing by double digits even with the fall in the earnings for the six months to end September 2023. TFG reported that group retail turnover was expected to increase 11.3%, while its TFG Africa division, which houses its core South African operations, would show retail turnover growth of 16.1% for the 22-week period. Excluding the acquisition of Tapestry, growth would be 9.7%. On a like-for-like basis, TFG Africa grew 3.3% for TFG Africa.
TFG London's retail turnover, however, declined 12.4% in pound terms "off a high post Covid-19 base", while TFG Australia fared better with a 6.6% decline in Australian dollar terms off a record prior period base.
As for load shedding, TFG Africa, excluding Tapestry, lost about 250 000 trading hours during the period due to load shedding, which was 1.8 times more trading hours than the prior period due to higher levels of load shedding. The Tapestry business lost about 91 000 trading hours.
The group said that by 26 August 2023, a total of 2 284 stores had backup power, representing about 75% of TFG Africa's turnover.
Despite this the company expected persistent load shedding to "depress economic growth, prolonging profound impacts on small business, employment, consumer spending, our local supply chain partners and ultimately the retail sector".
Looking ahead, the company said the growth outlook for the remainder of the 2024 financial year, both globally and in SA, was "likely to remain challenging" with incomes under pressure. Consumer confidence was only expected to recover in the second half of the 2024 financial year, it said.
TFG group CEO Anthony Thunström said in a statement that "despite these significant external challenges" the company had a "resilient business that is focused on executing its key strategic initiatives and delivering market share gains".
"The group has consistently invested in the business throughout the cycle and, with our focus on consolidation and business optimisation this year, we are well positioned for sustained future growth".
