- Foschini profits have been affected by Covid-19 lockdowns which imposed store closures, domestically and internationally.
- The Covid-19 second wave in the UK and Australia threatens to impact trade performance into the second half of the 2020 calendar year.
- The acquisition of Jet Stores will allow the group to take advantage of any economic recovery, says CEO Anthony Thunström.
Retailer The Foschini Group's (TFG) half-year earnings took a hit as a result of the Covid-19 pandemic, but CEO Anthony Thunström believes it is still well poised for growth, given its recent acquisition of Jet Stores.
On Thursday TFG reported its earnings for the six months ended 30 September. It showed that profit declined 26.1% to R12.5 billion.
The fashion retailer attributed this loss to the Covid-19 imposed lockdowns, stating that "most of the group's 4 083 trading outlets across all our major trading territories were closed in the month of April. Further lockdowns have since been announced in certain states of Australia, as well as in the UK and other international markets, which will continue to adversely impact trade performance in these countries well into the second half of the 2020 calendar year."
Online turnover showed strong growth both in Africa and Australia. In Africa online turnover increased by 115% and Australia reported a 66.8% increase for the half-year period. Group online turnover now contributes 14.4% to group retail turnover.
Headline earnings per share decreased by 117.1%, this is lower than 125% decrease forecasted in their trading update in October.
The group said lockdown and working from home drove a change in the product mix with cellular and homeware both performing strongly, contributing 3% and 1% respectively compared to September 2019. "Clothing performance was impacted by the heavy promotional activity in retail and the subdued demand for occasion and formal wear as a result of the tight Covid related social distancing rules implemented worldwide, the lack of social gatherings and the increase in work-from-home."
Thunström noted the group turnover and earnings have been negatively impacted by Covid-19, but said that management teams had responded "with urgency" and "showed great resilience" in the past six months. The Jet acquisition is one such of these actions which provided TFG with a strategically important expansion into the value segment of the South African retail apparel market. "The group is well positioned to take advantage of any economic recovery and will continue to invest organically in its brands," he said.
The acquisition of Jet
The Cape Town-based retailer, which recently got the greenlight from competition authorities to acquire Jet Stores said "the inclusion of a purchase gain on acquisition of R694.3 million as well as acquisition costs of R14.3 million has impacted specifically on basic earnings per ordinary share and diluted earnings per ordinary share." Basic earnings per share decreased by 69.7%
In a statement released on Thursday, the retailer said it successfully concluded its acquisition of Jet's South African operations from Edcon for a consideration of R333.2 million, recognising a provisional gain on purchase of R694.3 million in profit or loss for the current period. This included the transfer of 382 stores which collectively employ approximately 4 800 staff.
Jet stock purchases are to increase, and this will boost turnover growth. The integration of Jet into TFG is expected to be completed by the end of this financial year.