Price cuts on the cards as TFG adapts to tough times

Share current article via EmailShare current article via FacebookShare current article via TwitterShare current article via LinkedInThabiso MochikoOpens in new windowOpens in new windowEnter fullscreen mode displaying this image.ExpandTFG owner of Jet, The Fix, Markham, Sportscene. Picture: Supplied Story audio is generated using AI

TFG is reviewing its menswear prices to attract cash-strapped shoppers while accelerating store closures and expanding its Bash online platform as it prepares for another difficult trading period amid mounting pressure on household finances.

The owner of Foschini, Markham, Jet, Sportscene and Totalsports is lowering entry-level prices after spotting signs that consumers are trading down to cheaper clothing, particularly in menswear, where it holds a leading market position.

CEO Anthony Thunström said the group was not banking on an imminent recovery in consumer spending and would instead focus on cutting costs, improving store profitability and growing online sales.

“We are seeing evidence of buying down in the segment, and as a result, we will be sharpening our opening price points and pricing architecture,” Thunström said at the group’s interim results presentation.

Menswear turnover fell 1.5% in the six months to September, while gross profit dropped 4%. The division was also hit by shipping delays and congestion at Durban port because of its heavier reliance on imported merchandise.

The pricing review underscores growing pressure on clothing retailers as rising fuel costs and weak consumer confidence force households to become more selective about spending. “To be honest, we don’t know when the cycle will bottom out and turn,” said Thunström.

TFG’s outlook has been further clouded by a weak start to the second half. African sales declined 0.7% in October after a volatile first six months. Thunström said trading in the first week was in line with expectations, with momentum expected to build towards Black Friday.

However, delayed shipments through Durban port remain a concern. TFG expects the backlog to clear only around February, potentially affecting stock availability during the festive season.

While cancelling some late orders to avoid excess inventory, the retailer is also rebuilding stock buffers to protect availability during peak trading periods.

Alongside tighter inventory management, TFG is shrinking its physical store footprint.

The group closed 120 stores in the first half and plans to shut another 60-80 before year-end, taking total closures to between 180 and 200 stores.

We’re using the combined capabilities of both channels to acquire customers, increase engagement … and improve the productivity of the retail infrastructure that we already own

Almost half of those already closed were in distressed central business districts, where consumer traffic has shifted towards malls and convenience retail formats. The closures released R190m in working capital, and TFG estimates about 20% of sales from closed outlets will migrate to nearby stores or Bash.

More than 95% of employees affected by the closures were moved elsewhere in the business.

The group removed R257m in costs during the first half and targets a further R222m in the second half. The programme is expected to generate annualised cost savings of about R854m and an annualised profit benefit of roughly R540m.

A key beneficiary of this strategy is Bash, which is becoming one of TFG’s most important growth engines. Online sales surged 53.3% to R2.2bn in the first half, bucking weakness in traditional retail.

The growth comes as buy now, pay later (BNPL) gains traction among shoppers, particularly online. CFO Ralph Buddle said demand for TFG Money remains strong at about 4-million applications a year, but applications fell 10% in the first half, partly as more consumers turned to BNPL options.

The number of accounts on TFG’s books declined 1.9%, while credit sales fell 2.4%, representing 25.8% of TFG Africa sales. Buddle said BNPL was absorbing some of that activity and helping drive online sales, particularly among younger consumers who use the product as a budgeting tool. Thunström said the payment option has proved especially popular on Bash.

TFG attracted 449,000 first-time online customers during the period, with more than 40% placing their first digital orders through Bash Store while visiting a physical outlet. The platform now operates across more than 3,200 stores.

“We’re not building an e-commerce business to sit alongside a traditional store network,” Thunström said. “We’re using the combined capabilities of both channels to acquire customers, increase engagement … and improve the productivity of the retail infrastructure that we already own.”

Despite weak consumer demand, TFG Africa grew turnover 3.8% to R19.7bn, supported by market-share gains and stronger sportswear sales.

Internationally, however, conditions remain challenging.

Operating profit fell 26.5% in the UK and 28.3% in Australia as weak consumer confidence and promotional trading weighed on performance. The UK business is also recovering from an October cyberattack that disrupted online trading, while TFG is restructuring underperforming brands in both markets.

Thunström said acquisitions were off the table for now, with surplus cash likely to be directed towards further debt reduction or enhanced shareholder returns through dividends and share buybacks.

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