The Foschini Group’s (TFG) Australian business reported a 4.4 per cent drop in sales for the half-year to September 30, with discretionary spending under significant pressure across the market.
TFG Australia runs the likes of Tarocash, YD, Connor and Johnny Bigg in Australia and New Zealand, all owned by TFG in South Africa. Like-for-like sales fell 3.6 per cent over the period. Despite the sale slip, gross margin rose 40 basis points to 65.3 per cent.
Trading expenses rose only 0.5 per cent on the prior period. The group noted this was not enough to avoid significant operational deleverage. Segmental operating profit for TFG Australia fell 28.5 per cent in South African Rand terms.
The Australian arm closed 30 stores and opened 11 during the half. It now trades from 582 stores across three countries. Online sales made up 7.6 per cent of TFG Australia sales, down from 7.7 per cent a year earlier.
Trading has weakened further since the end of the period. TFG Australia sales fell 5.3 per cent in the five weeks to October 31, compared with growth of 0.6 per cent in the same period last year.
TFG reported that a reset under new leadership is under way at Tarocash. It also noted strict cost control had kept trading expenses broadly flat in both its Australian and UK businesses.
Across the group, revenue rose 0.1 per cent to R31.4 billion (around A$2.7 billion) in the half to September 30. Sales fell 0.4 per cent to R29.0 billion but grew 1.4 per cent in constant currency. Group operating profit fell 6.5 per cent to R2.1 billion, and headline earnings per share dropped 6.8 per cent.
TFG Australia contributed 13.8 per cent of group sales. TFG Africa contributed 68 per cent and grew sales 3.8 per cent, with online sales up 53.3 per cent on the back of its Bash platform. TFG London, which runs brands including Phase Eight, Hobbs, Whistles and White Stuff, reported a 2.2 per cent sales decline in pounds. Its segmental operating profit fell 32.5 per cent in rand terms.
The UK business was hit by a cyber incident in October that affected the Phase Eight, Hobbs and Whistles brands. Their stores kept trading, but at reduced levels. White Stuff was not affected and grew sales 4.8 per cent in the five weeks to October 31.
Group inventory was 4.0 per cent lower than a year earlier. Pre-IFRS 16 net debt fell R0.9 billion to R9.1 billion.
Looking ahead, TFG expects consumer confidence and spending to remain constrained across all three of its territories for the foreseeable future. It pointed to higher fuel prices and the resumption of interest rate increases in South Africa and Australia. The group reported that it enters the second half with a leaner cost base, a smaller store footprint, lower inventory and reduced net debt.
Long-serving chairman Michael Lewis will retire from the board on December 31. Professor Alexandra Watson will take over as chair from January 1, 2027.