Covid-19 second wave already hurting Foschini's international operations

TFG said the second wave of infections has caused many of its stores in Australia, New Zealand and UK to close again.
Photo: Gallo Images/OJ Koloti
TFG said the second wave of infections has caused many of its stores in Australia, New Zealand and UK to close again. Photo: Gallo Images/OJ Koloti
  • The Foschini Group (TFG) has issued a trading update warning investors to expect up to 125% tank in its headline earnings in the six months ended in September.
  • The fashion retail group said the second wave of infections in Europe and Australia has caused many of its stores to close again.
  • In the UK, online shopping is not also growing to try plug some of the gap caused by decline in store sales.

Fashion retailer, The Foschini Group (TFG) has warned shareholders to expect its headline earnings to tank by as much as 125% – headline earnings being the measure of profits that focuses solely on the health of companies' day-to-day operations and investment activities.

The group, which recently got the green light from competition authorities to acquire Jet Stores, said its basic earnings per share, on the other hand, were expected to fall by between 65% and 75% in the six months ended on 30 September. TFG is due to publish its half-year results on 5 November.

The retail group already documented challenges caused by the lockdown trading restrictions when it presented its results for the year ended in March. While that set of results did not contain much of Covid-19 disruptions, TFG was already worried about the drastic decline in sales and footfall after the lockdown began and appealed to shareholders to raise R3.95 billion through a rights offer.

On Friday, TFG shared in great length all that transpired since then. In TFG Africa, trading patterns remain volatile, despite the improvement brought by the reopening of all of its stores in from June. In London, the re-opening of city centre stores was held back until October and footfall in those locations has remained consistently weak because of the fall in commuter and tourist traffic.

In TFG Australia, the improvements brought by the re-opening of all stores across Australia and New Zealand in May has been reversed to an extent by restrictions imposed by government to respond to the second wave of Covid-19 infections in that region. Some TFG Australia stores in New Zealand as well as Victoria, Australia had to close again.

"New Zealand had 17 stores closed for two weeks. However, these have subsequently reopened. Victoria has had 84 stores closed from 2 August. These stores still remain closed and the Victoria State Government anticipates lifting the lockdown regulations at the end of October," wrote the fashion retail group in a trading update on Friday.

However, it said its Australian operations remain "significantly cash positive" and have to date not needed to use any of its borrowing facilities.

TFG said as further lockdowns have now been announced in certain other states of Australia and in the UK, the trading restrictions which will continue to dampen its performance. On the positive note, online sales have continued to skyrocket, exceeding management’s expectations, except in the UK.

"Given the strong consumer association of our UK brands with occasion and formal workwear, it is clear that a recovery in demand for our clothing and accessories will be closely linked to the timing of a return to social mixing and in-office attendance," added TFG.

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