SHARES in Foschini Group (TFG) have ramped up its capex spending in the coming financial year, and investing R2.1 billion as it embarks on growth drive and plans to build 10 new manufacturing business units in the coming year.
Despite this its shares tumbled nearly 4 percent to R133.24 at the market close on Friday, as the bourse took strain with a global sell-off sparked by recession fears. However, the counter is down 13.4 percent over the past 12 months.
TFG said it had committed more than R600 million towards opening in excess of 350 new stores.
The investment in increased manufacturing capacity will more than double employment opportunities in the group’s own factories and strategic non-owned cut-make-trim factories from 5 200 in 2022 to 11 200 by 2026.
“The R2.1bn capex commitment for 2023 continues the group’s strategic investments to further strengthen its differentiated business model and mitigate disruptions to global supply chains,” it said.
In its financial year to March 31, 2022 results posted on Friday, TFG – which owns American Swiss, Markhams, and @home – said the capex increase follows its record turnover of R43.4bn, a 31.6 percent increase, gross profit of R21bn, an increase of 40.3 percent and headline earnings of R3.3bn, an increase of 442 percent.
TFG chief executive Anthony Thunström said: “This strong performance during a period of significant uncertainty is a testament to the resilience of our operating model, management teams and employees.”
The group delivered robust market-share gains across all territories over the past financial year, achieving 27 percent growth in men’s and ladies’ wear in South Africa against average growth for the segment of 5.9 percent.
TFG said it achieved its performance despite the challenging trading environment, continued periods of lockdown, the civil unrest in KwaZulu-Natal and global supply chain disruptions, with retail turnover growth surpassing expectations at R43.4bn.
Thunström said the group opened 274 new stores in South Africa, completed 96 relocations and enlargements, rebuilt or restored 176 looted stores and opened 41 new stores in Australia, and eight new stores in London.
The group achieved double-digit growth in its e-commerce turnover across all territories, recording an 18 percent increase in online sales in Africa, 13.8 percent in the UK and 26.9 percent in Australia, extending the trend towards online shopping experienced during lockdown as TFG accelerates its transformation into a true omni-channel retailer.
“TFG has made solid progress in our goal to create the most remarkable omni-channel experience for our customers, with the acquisitions of leading app developer Flat Circle and last-mile delivery service Quench, as we pave the way for the upcoming launch of our new integrated omni-channel platform that leverages group scale to bring all TFG brands together, along with third-party vendors,” said Thunström.
“This will create a home for all of our brands and other businesses that want to leverage TFG’s scale, bringing over 200 of the world’s best brands and more than 2 000 new styles a week onto one platform to provide an unrivalled selection across fashion and lifestyle goods,” he said.
Financial commentator, The Finance Ghost, said in a social media update on TFG: “It feels like TFG can’t put a foot wrong, regardless of tough trading conditions… There’s a lot of macroeconomic pressure, but TFG has made huge strides in strengthening its business.”
Finance Ghost added, “The highlight for me in the results was the improvement in the gross margin from 45.5 percent to 48.5 percent. That’s a substantial move, which the company attributes to lower inventory markdowns due to strong consumer demand and an increasingly efficient, local supply chain. At this rate, the local supply chain is becoming a significant advantage in a sector that is fiercely competitive.”
BUSINESS REPORT