TFG scales up in Africa as SA growth sags

Doug Murray, CEO of The Foschini Group.
Photographer: Freddy Mavunda

Image source: BDlive

Retailers continue to cast their nets to the continent's fast-growing economies as an alternative earnings stream as South African consumers keep a tight rein on spending amid high debt and rising living costs.

The group, whose portfolio of 19 brands includes Fabiani, Totalsports and Due South, has 160 stores outside its home market and is aiming for as many as 375 outlets by 2020.

Although off a low base, TFG grew same-store or comparable turnover by 12.2% in the rest of Africa in the year to March, compared with 5.5% in SA.

Expansion remains fraught with challenges, however.

"A lot of international companies think Africa is one country but each country's legislation and consumer behaviour is different.

"Once we have scale we want to take product (that is) manufactured outside SA directly into those countries. Right now we bring it in to our distribution centres in SA, pay duty then send it out to African countries and pay more duty. We then have to reclaim the duty we pay in SA; it's very cumbersome," Murray said at a briefing.

Competitors Truworths and Woolworths are also adding stores outside SA.

TFG is due to launch start-up brand Soda Bloc in SA. The range, aimed at the nine- to 16-year-old or tween market, will be rolled out with three stores next week and 10 more by Christmas. It also wants to open standalone Foschini kids' stores and is eyeing an acquisition in this segment within two months.

"The profile of the South African population is quite young. As well as parents wanting to clothe their kids, there is a lot of peer pressure around fashion aided by exposure to social media," Murray said.

Despite a "stuttering" local economy TFG will expand floor space by about 6% each year.

"What's forgotten about the economy is that we have a very vibrant informal sector, and a lot of cash is exchanged in that sector. It's impossible for us and ... other businesses to be getting the growth we're getting with GDP (growth) of 2% and inflation of 6%. The numbers don't seem to add up," he said.

Still, factors like load shedding could dampen sales. From April to last month, load shedding cost the group R66m.

"To mitigate it we're testing the installation of inverters and batteries to assess how practical it is and we'll decide which are the priority stores. In a big store an inverter can cost around R200,000," Murray said.