The Foschini Group (TFG) lowered its final dividend 54.5% to 150 cents per share for the year to March 31, and spending and capital expenditure plans have been pushed back for the year ahead.
“The year ahead is expected to remain challenging, especially for the South African business where load shedding and increased consumer pressures are expected to deteriorate,” the group said Friday.
Trade since the year-end had been muted across all three of the group’s trading territories.
For the two months to May 2023, TFG Africa had retail turnover growth of 15.4% (5.8% excluding the Tapestry Home Brands acquisition), TFG London retail turnover fell 10.8% in pounds, while TFG Australia’s declined 4,9% in Australian dollars,
“Both TFG London and TFG Australia are up against a very high base in the comparative period, which was driven by post Covid-19 heightened demand for occasionwear and back to work shopping,” the group said in the annual results.
In the second half of the 2023 year, support and administration expenses of R220 million were frozen, and similar cost savings initiatives were planned for the year ahead.
Planned capital allocations for 2024 had been revisited, and planned new store openings had been curtailed, resulting in store capital expenditure likely to approximate half of what it was in 2023.
The group has maintained a robust balance sheet despite the R2.2 billion acquisition of Tapestry, capital investments and higher levels of load shedding over the 2023 year.
“TFG’s future brand and store roll-out pipeline remains as robust as ever; however, current market conditions require a slower execution timeline of this roll-out,” the group said.
In the past year, retail turnover increased 19.4% to R51.8bn. Group revenue increased 19.4% to R55.1bn. Online retail turnover grew 6.6 % to R4.7bn, or 9,1% of total group retail turnover.
The gross margin contracted by 60 basis points to 47.9%, due in part to expenses and lost trading hours associated with load shedding. Trading expenses were contained at 41.3% of retail turnover (41.4%).
Headline earnings per share of 968.9 cents was down by 4%. Cash generation from operations fell to R7.1bn from R8.2bn.
Operationally, considering macroeconomic conditions and the likelihood of continued load shedding, inventory purchases would be a focus to defend gross profit margins, and were expected to be below those of the 2023 year on a like-for-like basis.
TFG Africa lost about 360 000 trading hours during the 12 months ended March 31 due to load shedding, but the true impact was estimated at more than double the figure, as customer demand was dampened by the disruption and inconvenience, with reduced footfall observed before, during and immediately after load shedding periods, TFG’s directors said.
Additional unbudgeted diesel and security costs were also incurred to power and protect operations and stores impacted by load shedding.
“Consequently, group gross margin contracted 60 basis points as a result of not passing on all product cost inflation to customers in South Africa as well as proactive management of excess inventory due to load shedding. This was partially mitigated by the post pandemic demand recovery in the London and Australian businesses.”
Credit lending criteria would remain conservative given the strong cash turnover growth and the prevailing economic conditions, they said.
TFG’s share price gained 2.64% to R93 on the JSE on Friday, well down from R133.24 that it traded at on the same day a year previously.
BUSINESS REPORT