Global Courant
The Foschini Group (TFG) says load shedding has weighed heavily on its business for the twelve months ended March 31, 2023.
TFG said it recorded around 360,000 hours of trading as a result of the tax cut – this is a conservative estimate, however, with the group noting that the figure could be as high as 730,000 lost hours.
This is because customer demand was significantly dampened by the associated disruptions and inconvenience of load shedding, reflected in reduced footfall.
The group said the financial impact of the shutdown has reduced retail sales by more than R1.5 billion, with an associated impact on operating costs and inventory supply.
While the group has invested in alternative energy, which has somewhat mitigated the effects of load shedding, they are much less effective during longer hours of load shedding during phases 5 and 6.
By the end of the reporting period, 1,875 stores had emergency power, representing approximately 75% of the group’s retail sales. There are plans to power the rest of the group’s stores.
In total, the group has so far spent around R200 million on alternative power solutions, which were not budgeted, with additional diesel and security costs also not budgeted.
The group’s financial results were also affected by outages.
While the group’s retail sales grew 19.4% to R51.8 billion (15.2% excluding Tapestry, which was acquired in August 2022), total earnings per share fell 4% to 968.9 cents per share ( FY22: 1 009.0)
In addition, the group dividend decreased by 54.5% to a final dividend of 150.0 cents per share.
The other group results are as follows:
Retail growth up 19.4% to R51.4 billion Revenue up 19.4% to R55.1 billion (FY2022: R46.2 billion) Online retail revenue up 6.6% to R4.7 billion Group gross margin up 60 bps down to 47.9% (FY2022) : 48.5%) Operating profit before finance costs up 12.4% to R5.4 billion After-tax profit up 4.0% to R3.0 billion Ordinary earnings per share up 4 .1% to 938.5 cents (FY2022: 901.9 cents per share) Headline earnings per share decreased 4.0% to 968.9 cents (FY2022: 1 009.0 cents per share) Cash flow from operating activities of R7 .1 billion (FY2022: R8.2 billion)
Outlook
The group said the coming year is likely to be extremely challenging, particularly for South African companies, due to the elimination of the tax and increasing consumer pressure.
In light of the difficult business environment, TFG said it would take a conservative approach in treating FY2024 as a year of consolidation, with a focus on improving operating leverage.
With more charges expected, their focus will shift to controlling inventory and defending gross profit margins by absorbing working capital, with inventory purchases in FY24 set to be lower than in FY23.
TFG said trading has been muted in all its trading areas since the end of the year.
For the two months ended May 2023 (compared to the same period a year earlier), TFG Africa had sales growth of 15.4% (5.8% excluding Tapestry), TFG London retail sales fell by 10.8% (GBP) while TFG Australia fell by 4.9% (EUR).
However, results in TFG London and TFG Australia were at very high levels compared to the comparable period, as the end of the Covid-19 lockdowns saw an increased return for casual wear and back-to-work shopping.
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