Pandemic pummels TFG to R719m FY operating loss

Non-grocery retail giant The Foschini Group (TFG) posted a record R719.2 million operating loss (before finance costs) for its financial year ending March 31, 2021 on Thursday, from an operating profit of R4.7 billion in its prior financial year.

This starkly highlights how the group, which largely owns upper market retail chains like Fabiani, Foschini, American Swiss and @home, has been pummelled by the Covid-19 pandemic and related lockdowns and restrictions to trade.

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TFG’s United Kingdom (UK) operation (TFG London) took the most pain with the harshest lockdowns experienced of the three major regions (including Africa and Australia) that the group operates.

TFG London lost around half of its trading hours for the financial year, which not only saw a plunge in sales but resulted in the group having to impair the value of the UK business by R2.7 billion on a non-cash basis (goodwill and intangible assets).

“Most of the group’s 4 083 trading outlets across all our major trading territories – South Africa, the UK and Australia – were closed in the first month of our financial year [April 2020],” the group reiterated in its results Sens statement.

“In South Africa, 447 jewellery stores remained closed during the month of May 2020 due to the prevailing lockdown restrictions. Further lockdowns were experienced in certain states of Australia, in the UK and other international markets, which continued to adversely impact trade performance in these countries throughout our 2021 financial year,” it said.

“While all three of our main territories continue to be impacted by Covid-19, TFG Africa and TFG Australia continued to trade strongly in Q4 FY2021,” it pointed out.

TFG Africa, where the group has more than 3 000 stores (largely in South Africa), contributes most of TFG’s overall revenues.

“The UK continues to be the hardest hit with no stores operating during Q4 FY2021,” said the owner of Phase Eight, Whistles and Hobbs stores.

“As previously advised, the third UK national lockdown [announced on January 4, 2021] was in place for the full fourth quarter of the financial year, with non-essential retail only reopening on April 12, 2021. In total, the UK lost approximately 50% of its available store trading hours during the past financial year and experienced severely depressed footfall and consumer confidence for the remainder of the year,” added TFG.

Meanwhile, TFG confirmed that overall group revenue was down 7.5% to R35.6 billion for the financial year.

Group-wide retail turnover was down 6.7% to R33 billion.

Excluding the recently acquired Jet business, the group’s overall retail turnover for the year decreased by 13%.

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However, it said that it saw “a strong recovery in H2 FY2021” which includes the Black Friday and December holiday peak sales season. Second-half retail turnover grew by 11.2% (excluding Jet – 0.8%) compared to H2 FY2020 (which was largely pre-Covid).

TFG reported an 80.8% plunge in headline earnings per share (Heps) of 197.9 cents (March 2020: 1 029,3 cents per share). But it is worth noting that its R3.8 billion capital raise last year will have also had a contributing dilutionary impact.

“The group generated cash from operations of R9.4 billion for the year ended March 31, 2021, which is a very pleasing result,” it however, pointed out.

“This was achieved through the focused preservation of cash resources and the responsible optimisation of working capital. This, together with the R3.8 billion successful rights offer, has supported the reduction in net debt from R8.4 billion at the end of March 2020 to R1 3 billion at the end of March 2021 [both years being pre-IFRS 16],” it added.

As per its prior guidance, TFG decided not to pay-out a dividend for its latest financial results due to ongoing Covid-19 uncertainty.

However, it has highlighted the possibility of resuming dividend payments next year based on the current recovery in trading conditions.

“The Supervisory Board has decided that it would be prudent not to declare a final dividend at this year-end, but plans to resume dividends in the 2022 financial year,” TFG said in its Sens.

TFG’s share price was trading just over 3% weaker around 13h00 on Thursday, after falling more than 5% in morning trade on the JSE.