TFG's growth strategy delivers sales ahead of sector

TFG's growth strategy delivers sales ahead of sector

FMCG SUPPLIER NEWS

The Foschini Group, - Nov 3rd 2011, 16:35

Retail group TFG (The Foschini Group) has surged ahead of competitors in the retail sector increasing turnover by 18.5% to R5.4 billion and headline earnings per share by 25.6% to 341,9c in the six months to end September 2011. 

Its interim dividend has increased by 37,7% per share from 138.0c to 190.0c.

Industry figures from the Retail Liaison Committee, which tracks sales of most major players in the retail space, show the group has consistently outperformed its competitors for the past 12 months. And TFG says the outlook for continued growth remains positive.

Doug Murray, CEO of TFG says retail turnover for the first five weeks of the second half has continued to be encouraging, though some caution is warranted given the very difficult and fragile global financial environment.

“We remain confident that we can again deliver a favourable result for the second half albeit off a very strong comparative base. The second half is always heavily dependent on Christmas trading,” he says.

Murray says TFG’s pleasing results are due in the main to the strategic initiatives undertaken by our group over the last few years, assisted also by improved consumer spending, which became evident to us last year.

In support of the group’s strategy of investing for the longer term, it continued to grow trading space in certain of its trading formats, opening 71 new stores in the first half. 140 stores are expected to be opened during the full year, increasing trading space by 7%.

Murray says the group’s largest merchandise category, clothing grew exceptionally well at 19.9%, whilst all other merchandise categories performed well, gaining market share.

Credit sales as a percentage of total sales increased to 63.1% from 61.8%.

Commenting on each of the divisions, Murray reported the ongoing success in the Foschini division. The division which comprises Foschini, Donna Claire, Fashion Express and Luella increased its store base by 16 stores to 500 during the period with clothing sales increasing by 20,6%.

The @home division, which trades out of 84 stores, 13 of which are in the larger @homelivingspace format, increased sales by 15,5% to R350 million. With the rate of new store openings having slowed, a greater focus is now being placed on merchandise efficiencies.

Exact, which has 210 stores increased clothing sales by 27,4% with a focus on clothing price points, whilst menswear division, Markham with 256 stores increased its clothing sales by 22,3%.

Despite the 2010 FIFA World Cup inflated base, the sports division trading as Totalsports, Sportscene and Due South grew its clothing turnover by 13,7% whilst increasing its store base by 26 to 350 stores. Excluding the World Cup months of May and June, sales were 20,6% up.

The jewellery division comprising American Swiss Jewellers, Sterns and Matrix, increased its store base during the period by 8 to 389 stores. Taking into account the substantial increase in the gold price, trading was satisfactory with turnover of R592 million.

RCS Group, in which TFG holds a 55% share with the balance held by Standard Bank, has successfully raised R1.5 billion through its Domestic Medium-Term Note programme to fund its future expansion through a mixture of long and short term paper. It now has surplus funding of about R1 billion which it will use to support its future growth. Its net profit before tax increased by 24,7% in the period.

Subsequent to the half-year, TFG has acquired the luxury menswear brand Fabiani which gives it an entry into the high end customer segment where it currently does not operate. TFG has also recently entered into a franchise agreement with an exciting footwear and accessory international brand Charles and Keith with its first store being opened in Canal Walk Cape Town. Early indications are that this brand has great potential for expansion.