The Foschini Group (TFG) has reported a slip in performance in its Australia market for the full year amid subdued consumer spending.
Sales at TFG Australia – comprising of five fashion brands such as Tarocash and Connor – were down 5.8 per cent to 8.87 billion South African Rand (~A$764 million).
TFG Australia also manages Johnny Bigg, Rockwear, and YD.
In its recently released annual report, TFG reported that its Australian market “encountered an environment characterised by high promotional activities, sustained high inflation and interest rates adversely impacting consumer disposal income.”
The drop in sales added to a 22 per cent fall in profit before tax for its Australia segment, which was also driven down by a 4 .1 per cent lift in employee costs.
Australia was the only market where TFG reported a total sales drop, with the group’s London and Africa markets reporting growth year-on-year, including a 13.2 per cent sales lift in London to R8.78 billion, and a 4 per cent sales lift in Africa to R42 billion.
The subdued trading environment in Australia is also impacting goodwill at Tarocash, with TFG reporting a R61 million impairment (~A$5 million).
“A brand impairment charge of A$5 million relates to the carrying value of the Tarocash brand, which carrying amount was trimmed by 11,4% occasioned by the transfer of its “big and tall” business to the stand-alone speciality brand of Johnny Bigg,” TFG reported. “Although the brand equity generated by Johnny Bigg is not recognised as an asset under IFRS its value is more than reflected in profit and cash flow generation.”
TFG also noted that the current economic climates in the UK and Australia, uncertainty surrounding the future economic conditions of the retail industry, the Middle East conflict and uncertainty in global markets, resulted in significant estimation and judgment applied in the annual impairment assessment.