Tarocash’s parent company TFG has spotted green shoots in the Australian market off the back of a $9 million fall in earnings before interest and tax (EBIT) in the financial year to March 1, 2025.
In its recently released annual report, the South African-based company that manages local fashion retailers like Tarocash, Connor and Johnny Bigg believes the Australian market is showing early signs of stabilisation.
This follows a subdued economy through 2024 and early 2025, with high household debt, weak wage growth and soft consumer sentiment weighing on demand, alongside elevated interest rates and a tropical cyclone impacting the brand’s key retail regions of Southeast Queensland and northern New South Wales.
“Economic growth is projected to improve slightly, rising from 1.5 per cent in the 2024 calendar year to 1.9 per cent in the 2025 calendar year, driven by increased public spending and a gradual recovery in private consumption,” TFG reported.
“As a mature and largely value-driven market, with around 70% of spending on items under A$99, Australia is showing early signs of stabilisation. Value-focused brands have remained relatively resilient, though overall demand remains weak.
“There is cautious optimism that further rate cuts could boost spending, but any positive effects are expected to take time.”
TFG Australia’s slip in EBIT comes as total sales fell 2.5 per cent to $746 million. Gross profit was down by 3.6 per cent to $479 million. Despite slips in EBIT and gross profit, margins weren’t as affected, dropping 90 basis points and 80 basis points respectively.
EBIT margin was 10.9 per cent by financial year-end, with gross margin at 64.3 per cent.
“Australia remained under pressure due to subdued consumer confidence and promotional intensity, with sales declining 6.0 per cent year-on-year in ZAR [South African currency] terms and 2.6 per cent in AUD,” the CFO noted in the report.
“Nonetheless, deliberate inventory strategies helped limit the decline in gross margin to 64.3 per cent.
“EBIT before brand impairments remained robust at A$81 million (10.9 per cent of sales). Online sales increased 7.3 per cent and now represent 8.1 per cent of TFG Australia’s total turnover.”
TFG also reported that its Australian market opened 32 new stores, pushing the region’s total floor area to 102,298 square metres, or 610 stores.
TFG chairman Michael Lewis added that the group’s London business also faced a hard time with EBIT, compared to its core African market where EBIT grew 12.3 per cent.
However, Lewis noted both London and Australia did well to contain their respective EBIT declines in constrained consumer environments.
“We remain confident about the medium-term future for these businesses and platforms,” Lewis wrote in the report. “This is evidenced by the decision to acquire, on attractive terms, White Stuff in the UK.
“The small decline in TFG Australia’s profit, compared to its peers in Australia, is a reflection of the strength of the management team.
“Both businesses face economies that were adjusting to policies designed to contain the inflation outburst emanating from the unprecedented loose economic policies pursued globally during COVID-19.”