Cape Town-based international retail giant The Foschini Group (TFG) has closed 148 outlets within TFG London, its European business which has been hardest hit in the wake of the global Covid-19 pandemic and related lockdowns.
This is revealed in TFG’s latest financial results for the half-year ending September 2020, published on Thursday. It shows TFG London’s turnover plunging over 56% for the period.
However, the division – which operates 861 Phase Eight, Whistles, Hobbs, Studio 8 and Damsel in a Dress premium womenswear stores in some 24 European countries, including the UK – also opened 37 new outlets in the half-year.
Despite the store closures, TFG CEO Anthony Thunström told Moneyweb during an interim results interview that the group is committed to its TFG London business and expects things to turn around strongly once Covid-19 has passed.
“Currently it is a big concern for us, especially with the UK and other countries in the region going into further lockdowns following a second wave of Covid-19 infections … Between the UK and continental Europe, the region has been one of the hardest hit in terms of Covid-19 lockdowns in the world, which has meant many lost trading hours,” he said.
CBDs are quiet
“Most of our outlets are within bigger department stores or located in city centres, which have been the worst hit. People there are avoiding CBDs, with places like Oxford and Regent streets in London being comparatively empty,” he added.
TFG noted in its interim results Sens statement that the UK’s second national lockdown has been announced and is expected to last for four weeks, from November 5 to December 2. It said the lockdown “will have a significant adverse impact on trade performance”.
As TFG London targets the upper end of the market, adding to the division’s pandemic-related woes is the work-from-home trend and people curtailing nights out. This has seen a dramatic decline in spending on workwear and smart clothes.
“People are not buying fancy clothes right now as they are going out a lot less. This is a global trend and is not just happening in the UK or SA … However, it will pass,” said Thunström.
He said post the pandemic TFG London will be well-positioned for growth and will leverage off its strong online presence to gain market share.
The store closures are in line with the group’s plan to have a leaner, more digitally focused business in Europe, which has experienced higher growth rates in online shopping.
Even before Covid-19 hit, countries like the UK and US were facing massive retail store closures, especially among legacy department store chains, due to customers moving online. Brexit has also knocked the UK economy, hurting consumer confidence and retail sales.
“The vast majority of TFG London’s store closures this year have occurred where we have concessionary outlets or trading spaces within larger department store chains … We are moving away from this,” Thunström pointed out.
He did not rule out further store closures in the UK, where TFG London has most of its outlets. However, he noted that the division only contributed around 8% of TFG’s overall profit last year.
Africa the biggest contributor
According to TFG’s latest results, TFG London contributed 15.5% to overall group turnover, while TFG Australia’s contribution (with 534 stores) comes in at 18.5%. TFG Africa (with 2 949 stores, including 382 Jet stores acquired from Edcon in September) is by far the biggest contributor to overall group turnover, at 66%.
The group’s overall retail turnover for the interim period (April to September) was down 26.1% to R12.5 billion, largely due to the impact of Covid-19 lockdowns and trade restrictions in all three of TFG’s main markets.
Basic earnings per share and headline earnings per share plunged by 69.7% and 117.1%, respectively.
TFG noted that the group’s earnings performance was impacted by the Covid-19 pandemic and outlet closures as well as by the following non-comparable events:
- The dilution impact of the successfully concluded rights offer as announced on Sens on August 11; and
- The acquisition of certain commercially viable stores and selected assets of Jet in South Africa as announced on Sens on September 25. The effective date of the acquisition was September 25 and the inclusion of a purchase gain on acquisition of R694.3 million as well as acquisition costs of R14.3 million has impacted specifically on basic earnings per ordinary share and diluted earnings per ordinary share.