The Foschini Group (TFG) reported group retail turnover of R29bn, down 0.4% year on year. Operating profit declined 6.5% to R2.1bn, while headline earnings per share fell 6.8% to 272.8 cents. The group declared an interim dividend of 121 cents per share.
TFG also reduced net debt before IFRS 16 by R1bn to R9.1bn.
“In a tough six months, TFG Africa, our largest business, grew sales, profit and market share, and we have made tangible progress against our four key priorities, all aimed at enhancing returns,” said group CEO Anthony Thunström.
TFG Africa increased retail turnover by 3.8% to R19.7bn, while operating profit rose 2.7% to R1.7bn. Gross margin improved by 10 basis points, and trading expense growth was contained to 4%.
The performance came against a pressured consumer environment, with rising fuel prices and consumer confidence falling to -19 in the second quarter.
According to Retailers’ Liaison Committee data, TFG Africa gained 20 basis points of market share and recorded year-on-year market share gains in five of the six months. In September, sales grew 5.2%, compared with market growth of 1.8%.
The group removed R257m in costs from TFG Africa during the period, including R184m from stores and R73m from head office and overheads. Of this amount, R130m flowed through to profit, with the balance reflecting gross profit forgone from closed stores.
A further R222m in cost savings is expected in the second half, with a projected profit benefit of R171m. On an annualised basis, the actions amount to R854m in savings, with a R543m profit impact.
TFG closed 120 underperforming stores and opened 41 new ones. Almost half of the closures were in distressed central business districts, mostly when leases expired. The closures released R190m in working capital.
The group estimates that around 20% of the turnover from the closed stores will shift to other TFG stores or its online platform, Bash. A further 60 to 80 closures are planned for the second half.
Online sales grew 53.3% to R2.2bn, with e-commerce contributing R1.8bn. BashStore, which allows store staff to sell products through a Bash device, increased sales by 65.4% to R326m.
The group is also seeing greater interaction between its physical and digital channels. During the period, 191,000 customers placed their first online order through BashStore in a store, while 779,000 customers browsed online before making an in-store purchase – a 30% increase.
TFG estimates that its online capabilities have helped it avoid around R1.3bn in capital expenditure.
“Our stores are introducing customers to online shopping, and digital discovery is bringing them back into stores. We are building one integrated business that can grow while making better use of the capital we already have,” said Thunström.
The group's international businesses continued to face pressure. In local currency, TFG London's retail turnover declined 2.2%, while operating profit fell 26.5%. In Australia, turnover was down 4.4% and operating profit declined 28.3%.
Brand, cost and store footprint changes are under way in both markets, with new leadership at Phase Eight in London and Tarocash in Australia.
Despite the decline in group operating profit, cash generated from operations increased 20% to R3.7bn. Capital expenditure fell 37% to R672m, while inventory was 4% lower at R15.3bn.
The group said its focus remains on improving earnings through a leaner, more productive and less capital-intensive business.
TFG also announced changes to its board, with Michael Lewis set to step down as chairman and retire on 31 December 2026. Lewis joined the board in 1989 and has served as chairperson since June 2015.
Professor Alexandra Watson, emeritus professor at the University of Cape Town and chair of ADvTECH, will succeed him from 1 January 2027.
She will join the board as an independent non-executive director, alongside Thabiso Madiba, a chartered accountant and audit partner at Barakabora Assurance, and Craig Butters, a chartered accountant and CFA charterholder with more than 25 years of experience in investment analysis and fund management.
