First signs of recovery for The Foschini Group after initial lockdown knock

Fashion retailer, The Foschini Group [JSE:TFG] says its operations are starting to recover from the devastating impact of lockdowns in all the regions in which it operates, which saw revenues in its London and Australian operations tank 95{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} and 57{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} respectively from mid-March.

The retailer, which houses brands like Markham, Totalsports and Sterns, went into lockdown already battling with “heavy promotional activity in the market” in its African operations. It did not help that in the first half of its financial year, which ended in September 2019, Brexit-related uncertainty muted growth in its London operations, while the group flagged that in South Africa, which is TFG’s largest market, sales had become “particularly challenging”.

When the lockdown began in SA, clothing retailers were not allowed to operate at all, not even their online stores. In TFG’s other markets, the UK and Australia, the group continued with online sales when lockdowns in those countries began on the third week of March.

Massive revenue collapse

However, this did not stop TFG London’s turnover from tanking 94.7{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} from mid to end March. TFG Australia’s turnover between 16 and 29 March 2020 also fell 57.6{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2}. In comparison, TFG Africa’s revenue for the same period was down 34{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2}. But the group said its combined turnover still grew 3.6{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} in the twelve months to 31 March, thanks to exceptional pre-lockdown sales growth in Australia and a Black Friday boost in SA in the latter part of 2019.

Despite late-March sales showing that the coronavirus-induced lockdowns weighed heavily on the group, and analysts predicting that clothing retailers will struggle even after the lockdown is lifted as more consumers lose jobs, TFG said it has already started seeing some recovery as it has been allowed to sell winter clothes under Level 4 of the lockdown.

Signs of recovery

“We initially experienced a significant decline in demand for our products and services as our customers responded to the calls for social distancing and more recently because of lockdowns.

“This initial decline in demand has now started to reverse as our stores have partially re-opened in our various territories,” said the company in a statement published on the Stock Exchange News Service on Friday afternoon.

TFG said its all its stores in SA, as well as its Maitland manufacturing facility in Cape Town, had already opened. Its Cape Town factory will resume making clothes over the next few days. TFG, which last year financed 43{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} of its sales in SA by giving consumers credit, added that collections from 1 May have been “strong”.

“Recent collections have been above expectation as customers have rapidly adopted the electronic and other alternative payment channels made available to them,” said the company.

In the UK, TFG London has received the UK government funding to help it fund some of its fixed costs. For TFG Australia, the group said online sales have been above its expectations. Now that Australia has announced further relaxation of its lockdown restrictions, TFG said it anticipates that all its Australian stores will be re-opened by the end of May 2020.