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Send  Share  RSS  Twitter  13 Nov 2014

RETAIL: Strong Cash Sales Continue to Boost TFG Earnings

 



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Strong cash sales which increased by 20,3% in the past six months, continued to bolster retail group TFG’s (The Foschini Group) turnover and pushed headline earnings from continued operations up by 8% to 403,3c per share. An interim dividend of 263c per share has been declared, an increase of 8,2%.

Doug Murray, CEO of TFG says credit turnover growth was constrained due to the credit health of its consumers as well as management’s ongoing strict credit risk measures.

“While early signs of improvement in our debtors’ collections had become evident, the recent postal strikes have had an adverse impact on collections in the short term. For the first five weeks of the second half, retail turnover has been at stronger levels, growing by 13%, with cash growth of 23,5% and credit growth of 5,9%.

“Trading conditions in the credit side of our business are likely to remain challenging until the current level of consumer indebtedness normalises, and we will continue to apply appropriate credit risk management practices until there are clear signs of sustained improvement in consumer credit health.

“Cash sales as a percentage of total sales increased to 44,2% from 40,3% in the previous period, which is very encouraging.  We are extremely pleased that these customers continue to favour our stores indicating the desirability of our merchandise. The increasing contribution of cash sales is as a result of our strategic focus on driving cash vs credit turnover through diversification of our product categories and broader LSM appeal.  This clearly positions us well through the economic cycles.”

TFG Financial Services’ R5,9-billion retail debtors book  increased by 3% since March 2014, in line with credit turnover.  The bad debt as a percentage of the debtors’ book increased to 12,9% from 12,4% at the previous year end and remains within management expectations.  The debtors’ book is adequately provisioned at 13,0%, up from 12,3% at March 2014.

The transaction in relation to TFG’s 55% interest in RCS, which was completed at the beginning of August, provided a R1,4-billion cash injection which has currently been used to reduce borrowings whilst the company continues to evaluate all alternatives.

TFG is the holding company for 17 different brands which serve all consumer segments in the retail market. Its stores include menswear brands like Markham, Fabiani and G-Star, female fashion outlets including Foschini, Donna Claire, Fashion Express, and Charles & Keith, and its home and furniture stores, @home and @homelivingspace.

Its Sportscene, Mat & May and Hi brands are targeted at the trendy youth market, whilst its jewellery chains, American Swiss and Sterns are the number one and number two jewellers in the country.  It also remains SA’s largest retailer of top sports brands via its Totalsport outlets.  

In the current economic climate, all product categories performed satisfactorily with clothing growing by 8,5%, cellphones growing by 20,8% and homewares & furniture growing by 16,4%.

In line with its growth strategy, the group continues to grow its store base with 109 stores being opened in the first half and a further 100 stores to be opened across all its trading formats in the second half.  This will increase its total number of stores to more than 2300.

In the past month, the group also successfully opened five new stores in Ghana. It currently has a strong base of 134 stores in Africa in countries such as Namibia, Botswana, Zambia, Lesotho, Swaziland and Nigeria.  High demand for quality products from the growing consumer base in the rest of Africa, delivered total growth in turnover of 25,9% and same store growth of 16%. It plans to continue expanding its business across the African continent and aims to have between 280 and 300 stores in the rest of Africa by 2018.

 

 

 


 
 
 
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