Foschini reports massive loss due to challenging economic environment

The Foschini Group (TFG) has recorded a drop in profits for the first six months ended 30 September 2023 (H1 2024) as it fights a challenging economic environment.

“Performance in the current period was impacted by challenging trading conditions in all three territories, occasioned by rising interest rates, high inflation and, in South Africa specifically, taxi strikes and flooding in the Western Cape, as well as sustained levels of load shedding across all provinces,” the group said.

Group retail turnover grew by 12.4% due to the group’s expansion of its footprint and the further growth in online retail turnover.

Strong trade and the resetting of the cost base enabled growth of 0,8% in operating profit before finance costs.

However, the group’s headline earnings per share dropped by 15.3%, whilst basic earnings dropped by 16.2%.

The group’s interim dividend was thus cut from 170 cents per share in H1 2023 to 150 cents in H1 2024.

The group noted that its African operations showed resilience despite high unemployment, declining consumer confidence and load shedding – which resulted in a loss of 287,000 trading hours over the period.

The group added that the significance of load shedding has forced it into significant inventory clearance throughout H1’2024, impacting gross margin. However, it stressed that this positions its brands will going into H2 2024.

Outlook

“The Group continues to demonstrate its operating and financial strengths and agility and is well positioned to navigate through tough economic conditions and stretched consumer wallets in all territories in which we operate,” the group said.

“Trading conditions and consumer confidence are likely to remain under pressure, exacerbated by the sustained high interest rates and inflation across the three territories and ongoing load shedding in South Africa.

That said, retail turnover is expected to grow, especially in Q4 2024 as it will be against a softer base, with gross margins expected to improve in the second half of the financial year.

“The outlook remains cautious, especially in the UK, with possible further softening in the coming months as many industries battle persistent inflation, higher energy costs and higher interest rates, which may have a negative impact on jobs and consumer confidence,” the group said.

“It is expected that customers will continue to seek value, which could drive further promotional activity as the cost of living pressures continue throughout 2023.”