Tough half year for The Foschini Group

But it still manages to up its interim dividend.

A day after Truworths put out a tepid trading update, fellow Cape Town-based retail giant The Foschini Group (TFG) reported a decline in sales, group revenue and headline earnings for the half-year ended 30 September on Friday.

Despite the declines – amid a “challenging operating environment” – TFG managed to up its interim dividend for the period, as it improved its gross margins. This resulted in its gross profit increasing by a modest 2.5%.

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Read: Truworths slumps after tepid trade update

The group, which owns leading retail brands like Sportscene, Foschini and @home, declared an interim dividend of 160 cents per share (up 6.7%), compared to 150cps for its corresponding half year.

Key financial and operating metrics:

• Group gross profit up 2.5% to a record R12.8 billion
• Group gross margin increased by 220 basis points, as gross margins continued to improve across all territories
• Sales were 0.1% lower in TFG Africa (includes core SA market), 8.2% lower in TFG London and 2.4% lower in TFG Australia (in local currency)
• Group revenue came in 1.4% lower to R28 billion
• Operating profit before finance costs declined 3.4%, to R2.5 billion
• Basic earnings per share (EPS) declined 4.8% to 368.3 cents (Sept 2023: 386,8 cents);
• Headline earnings per share (Heps) declined 5.6%, to at 371.6 cents (Sept 2023: 393.6 cents)
• Group online sales grew 9.9% to R2.8 billion, contributing 10.7% to total retail sales. The growth largely attributable to growth of 47.9% in South Africa via its Bash platform
• Credit sales now contribute 26.8% (Sept 2023: 26.3%) to TFG Africa sales.

TFG’s share price initially traded weaker on Friday morning, but regained losses and was up around 4% in afternoon trade. It closed lower on Thursday – likely as a result of the weak trading update from peer Truworths.

Its weaker interim financial performance follows a strong full year showing for FY2024 (ending March, published in June).

Read:
Market welcomes TFG UK expansion with acquisition of White Stuff
Sportscene owner TFG’s shares surge 11% on record results

“All three territories have faced extended periods of macro-economic headwinds coupled with a high clearance-driven sales base in TFG Africa last year,” said group CEO Anthony Thunström.

“However, our focus on retail fundamentals and our strategic investments have contributed to a record gross profit performance and stronger margins in all of our businesses,” Thunström added.

In its Sens results filing, TFG noted that overall group sales declined 2%.

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“However, the improvement from the 3.5% decline reported in our 21-week guidance in September 2024 highlights the noticeable improvement in trading activity experienced in all territories since September 2024, and through to November 2024,” it said.

“Trading expenses were also tightly controlled, increasing by 5.7% despite stubbornly high inflation and the opening of 58 new stores during the period. Finance costs of R0.9 billion were broadly level against the prior period,” it added.

Positive signs

Thunström said recent post interim results trade is evidence that some positive economic signs may be bringing relief to consumers and buoying demand.

“In the five weeks since the reporting period ended, TFG Africa sales growth was up 8.3% compared to -0.1% for the interim period, whilst both London and Australia business posted stronger growths,” he said.

“The group is very well-positioned and prepared for what is hopefully a more positive business cycle and our strategic investments have positioned us favourably to benefit from any uptick in the economic conditions.”

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