The Foschini Group (TFG) – which is known for its mid- to upper-end retail stores like Foschini, Markham, SportScene, American Swiss and Fabiani – plans to use its bargain R480 million acquisition of Edcon’s Jet chain to enter the lucrative value retail part of the market.
And the timing couldn’t be better according to TFG’s top two executives – CEO Anthony Thunström and CFO Bongiwe Ntuli, who were speaking during a media briefing on Wednesday.
Although the Covid-19 pandemic and lockdowns have knocked the Cape Town-based group’s sales, they say the “opportunistic” acquisition of Jet comes at a time when South Africans are buying fewer fancy clothes and instead focusing on casual wear and more value-for-money apparel.
“Covid-19 has seen a shift in buying patterns, not just in terms of fewer people shopping at super-regional malls and an increase in online shopping, but also people moving away from smart wear to more casual attire [with the work-from-home trend gaining traction],” Thunström said.
“Demand for smart wear is really down, but ‘ath-leisure’ [athletic leisure] brands are flying off the charts.… People will eventually go back to smart wear as they start to go out again and back to work, but for the next six months at least we see casual being king,” he added.
He noted that TFG has been focusing on offering more value-for-money clothing over the last few years, however the group hasn’t managed to tap into the lower-end of the value retail sector that the likes of particularly Jet, Ackermans and Pep cater for. This segment has been doing comparatively better that other parts of the retail sector.
With job losses and the country’s economy being in recession even before the pandemic, many South Africans were already looking for better value-for-money buys.
“Jet has huge brand equity and gives TFG instant access to an area of the clothing retail market that our group has been underexposed to – the value retail segment,” Thunström said.
The Jet acquisition, which came about through Edcon’s coronavirus-induced business rescue process, sees TFG’s store count in South Africa surpassing the 3 000 mark. Around 382 of the more than 420 Jet stores it has acquired are in South Africa. Around 4 800 jobs have been saved through the deal.
Thunström told Moneyweb this will take TFG’s overall retail floor space in South Africa’s malls and high streets to over 900 000m2. However, more Jet stores could be included as negotiations with several landlords are still underway.
This, together with TFG’s organic expansion of its own retail chains, will likely see the group’s retail space topping one million square metres.
He said the group would be spending up to a further R120 million to integrate the Jet chain into the TFG business.
Most of this would go towards upgrading Jet’s outdated point of sale system and establishing an online shopping presence, as all TFG’s other brands do online sales.
“We plan to expand the Jet chain further over time,” said Thunström.
“As it stands, Jet will give TFG access to over 100 sites in South Africa where we did not have a presence before. It will increase the group’s overall market share.”
LISTEN: Anthony Thunström discusses Foschini purchasing more authentic local products, with Ryk van Niekerk