TFG in South Africa plans to reduce expenses as profits decline due to low demand
TFG (TFGJ.J), a new tab company in South Africa, announced on Friday that it will reduce expenses and shut down failing stores following a 21.3% decline in half-year earnings due to unpredictable monthly sales and weak winter demand.
Due to payday-related expenditure and lower-than-expected demand for winter clothing, TFG CEO Anthony Thunstrom emphasized that monthly sales in Africa were flat in June and weaker in September, as consumers faced challenging circumstances in all regions.
While interest rate cuts to increase spending have been sluggish, inflation is nevertheless sticky across TFG’s markets in Africa, Britain, and Australia, even though it has decreased from the previous year.
“We will pay close attention to all that we can control, considering the current situation. He informed investors that one of these was to push for additional cost reduction.
“You have to cut your cloth accordingly when it’s tough in retail,” Thunstrom said, adding that TFG will reassess inventory obligations and concentrate on eliminating failing outlets during the second part of the fiscal year.
Operating profit decreased 9.9% to 2.3 billion rand ($132.85 million) in the six months ending September 30, while headline earnings per share fell to 292.6 cents.
In contrast to group revenue, which increased 12.2% to 31.4 billion rand, group gross margin shrank 20 basis points to 49.3% due to increased promotional intensity.
According to Thunstrom, despite the recent slowdown and smaller basket sizes, foreign internet merchants like Shein continue to draw spending in South Africa.
By localizing production, TFG has adopted a fast-fashion strategy in womenswear to react to trends more quickly. By providing customers with more trendy styles, this has increased sales and enabled it to compete with international competitors.
Additionally, it is expanding male fast fashion and beginning to manufacture denim locally, which has the longest lead times due to the fact that the majority is imported from Asia and Mauritius, according to Thunstrom.
Approximately 550,000 units are anticipated for the fiscal year that ends in March 2026.
“Much shorter lead times, better gross margin, easier to kind of move with trends,” he said to Reuters.
