UK acquisition helps TFG boost earnings
THE Foschini Group’s foray into Europe is paying off, helping the clothing retailer report a 17.6% rise in headline earnings per share.
In January last year, TFG acquired high-end UK fashion retailer Phase Eight, which contributed 41.4% of cash-sales growth during the year under review.
Phase Eight has extensive reach in Europe, Asia, the Middle East, Australia and the US, where it has more than 540 stores. In the past financial year, TFG added 108 new Phase Eight outlets.
“Internationally, both Phase Eight and [UK-based] Whistles have still got significant roll-out opportunity. We believe Phase Eight can get close to 900 outlets over a five-year period,” group chief financial officer Anthony Thunstrom said this week.
TFG raised turnover 31.2% to R21.1-billion in the year to endMarch, including Phase Eight’s 11.6% contribution.
Total cash sales showed 18.4% growth, contributing 48.3% to group turnover. Credit turnover was up 5.9% from the previous year’s 4.3%, although although growth was slower in the secondhalf. Headline earnings per share were 1 055.8c.
“In the current year, we opened net 185 stores, and that gave us 6.5% space growth. I think we’re good for similar space growth, somewhere from 6% to 7% every year in South Africa at least in the next five years,” said Thunstrom.
The group planned to place the Whistles brand in those department stores in which it was not currently available. TFG would also open more standalone branches, even though it anticipated a slower rate of growth in these, he said.
The group was working on bumping up its online brand offering, said Thunstrom. The aim was to add three to four new brands to its online portfolio. Phase Eight and Whistles had a significant online presence in Europe, which worked in TFG’s favour, he added.
Opportunity for growth in South Africa existed in the online shopping space in the next five to seven years, particularly as the market was still new, said Thunstrom.
The company wanted to make sure that the online shopping experience was world-class by focusing on logistics and investing in the right IT infrastructure by using “similar systems to the biggest online retailers globally”, he said.
Locally, TFG was well aware of the challenges posed by international brands such as H&M, which were grabbing market share, he said. But having international retailers setting up in South Africa was good for the industry. “When you get someone coming and opening a new design store that you would find in London or New York, it raises the game for everyone.” UPDATE: The Foschini Group has been redesigning its stores to keep up with international standards
Part of TFG’s strategy over the past few years has been a focus on redesigning the look of its stores and product offering to keep up with world standards.
“If you talk about H&M and the centres they trade in, our turnover in Foschini, which is probably the closest match we’ve got in our portfolio to them, is up significantly, and it’s hard to prove exactly why,” said Thunstrom.
In terms of diversifying its target market, the group was also working on three projects that would focus on kids’ and teens’ clothing.
Towards the end of last year, it acquired the South African rights for Next Kids. It has opened a standalone Next Kids store and has a few “store-in-store” setups in some Foschini branches.
The Kids by Foschini range is also being given more prominence.
Soda Bloc, for tweens and teens, opened its first branch in August last year. It has since opened another 17, with more to come.