TFG on growth plans and Black Friday sales

SUREN NAIDOO: JSE-listed fashion, jewellery, homeware and furniture retail giant, The Foschini Group, or TFG as it is known, is on a big expansion drive with plans to open some 350 stores for the current financial year. It is also investing heavily in local clothing manufacturing as an increasingly vertically integrated retail group.

TFG CEO Anthony Thunström, and CFO Bongiwe Ntuli were in Johannesburg today and had a media round table to share more on these and other plans. Joining us now is Anthony Thunström to give us further insight. Welcome to the show, Anthony.

ANTHONY THUNSTRÖM: Hi Suren, great to be with you and all your listeners.

SUREN NAIDOO: Before we speak about The Foschini Group’s somewhat bullish growth plans, Anthony, tell us how were the Black Friday sales – did TFG beat pre-Covid sales levels?

ANTHONY THUNSTRÖM: We’ll be putting out a detailed trading update during January, so I probably can’t share specific numbers. But I think it’s safe to say we planned very carefully for Black Friday across all of our brands, both here and internationally, and it was I think a very pleasing result, both on the Black Friday day itself, but equally over the last couple of years, Black Friday has morphed. It’s very much at least a ‘Black Friday week’. For some retailers it’s stretching more and more over a longer period of November. But overall, we are very pleased and look forward to being able to share those results with the market in due course.

SUREN NAIDOO: Okay. Since you can’t talk financials, naturally, just in terms of the group you are quite a diverse group with all these different brands. Were there specific sectors that seemed to be performing better, clothing perhaps, with the world virtually opened up now?

ANTHONY THUNSTRÖM: Absolutely. Clothing is still the largest part of our group. It’s a relatively high-margin contributor as well, so it’s very important to our overall results, and clothing traded very well over the period. We essentially in our clothing division have a group of what we describe as very high-brand equity brands. Those are brands that we’ve spent years marketing, building up the equity using influencers, social media, various other marketing tools, really to make sure that our brands are super-desirable.

I think one of the patterns that we’ve seen emerging over the last couple of years, and certainly again this year, particularly due to the tough economic times people are really very keen to get any kind of Black Friday special offers on brands that they really love, brands with high brand equity, as I said. So clothing was strong.

I think the other sector that was particularly pleasing was homeware. We’ve had quite a rapid expansion in our homeware business. We recently acquired the Tapestry stable of brands. All of that traded very well over the last couple of months, but particularly in November and on Black Friday.

We relaunched Jet Home over the course of the last year as a spinoff of standalone stores post the Jet acquisition. They traded well as well. So homeware and furniture as a category did well. There was a lot of demand for technology. We sell a lot of tabular phones, laptops and notepads across the group. There is a lot of demand for that, a lot of demand for beauty and a lot of demand for jewellery.

So, kind of stepping back, there was pretty much strong demand across all of our different segments.

SUREN NAIDOO: The group has consistently been posting double-digit revenue growth, as you mentioned earlier this morning. Perhaps, barring the Covid period, is this the reason TFG is planning to open so many stores and is so bullish about expansion?

ANTHONY THUNSTRÖM: Maybe to unpack that I think we do have a large portfolio of brands at any point in time. Each of those brands is at a different stage in its life cycle. If a brand has in any way lost relevance with its consumer base, we [re]position it and give it another whole spurt of growth, another life. At the same time we always try to have several what we term ‘incubator brands’ that we are starting from scratch or ……5:10 looking to work out the formula to scale them. It’s something that’s very much in our DNA, something we do consistently.

Again, if you look at the 350-odd stores that we plan on opening this year, a lot of those are going to come from brands that we were incubating two, three years ago and which are now coming to fruition. So t’s something we keep investing in, keep focusing on. And as long as you get that pipeline right you should have brands that can continue to scale.

And then I think the other area that’s really shown a lot of pleasing growth is how we’ve been able to scale brands into further and further parts of South Africa. Most big listed retailers started concentrated in the big cities, almost by definition, over time. And I think, particularly on the back of the Jet acquisition that had a much more diversified store portfolio across the country, we’ve really seen that we can trade with a lot of our brands very successfully in places that we hadn’t actually traded before. So I think geographically [it’s] a big opportunity and, going back to the earlier point with the portfolio of brands, a lot of brands are still significantly underrepresented across the country.

SUREN NAIDOO: Taking that further, the expansion for The Foschini Group – you mentioned Tapestry earlier – TFG concluded the more than R2 billion acquisition of Tapestry Home Brands this year. How does this acquisition fit into TFG’s broader growth plans, because you talked about some of the brands like Volpes having 16 ……60?] stores, I believe, and that could be up to over a hundred by TFG. There were several brands in that acquisition.

ANTHONY THUNSTRÖM: It’s a really good question and I guess it links partly back to your previous question. We really are about finding, developing, [and] in some cases acquiring high-brand equity brands. If you look at the Tapestry Group, if you think mattresses and bedding in South Africa, Dial-a-Bed is an absolutely iconic household name, very much a market leader. ……7:32 Linen also in terms of standalone linen stores is head and shoulders above what else is in the market.

The reality, though, is all of these businesses at a point in time have some constraints in terms of their own ability to scale further and to reach their maximum potential. We’ve got an exceptional property team that’s able to really analyse the data of our existing store footprint.

We are heading towards 3 500 stores across South Africa, so we’ve got some degree of coverage and data on pretty much most of the shopping nodes across the country, and we can use that to start to inform our decisions in terms of where the rollout opportunity sits – location, strategy, size of stores, what rentals we should be paying.

Again, going back to the Tapestry Group, that acquisition, as you said, came through at the beginning of August. We have already opened 17 new Tapestry stores and in the two-odd months that we’ve owned them Tapestry, as it was pre-The Foschini Group, probably would’ve opened, I don’t know, three or four stores in a year. So to have done 17 in two months I think shows the runway. And looking ahead I think [we’ve] very well identified 100-plus locations. But we still want to take Tapestry to really……8:57 and that’s just the first cut. There’ll be more to follow.

SUREN NAIDOO: Anthony, you hinted at further acquisitions possibly from an acquisitive growth perspective for TFG during the briefing earlier today, but you may be eyeing the UK somewhat. Is TFG still cash-flush for acquisition opportunities? I know that the group had a capital raise of some R4 billion a year or two during Covid.

ANTHONY THUNSTRÖM: Yes, absolutely. Look, we do have very strong balance sheets, and that’s something that we’ve done a lot of work to ensure is in place. We have, again, a very strict set of criteria around potential acquisitions, but it is again very much part of our growth DNA. We get approached on a very frequent basis with opportunities – in many cases almost weekly. We filter through those criteria pretty much religiously. We probably get to a nondisclosure agreement stage with something like one out of a hundred-odd opportunities that we come across. And we continue to kind of explore things that would make sense if they plugged into The Foschini Group platform.

SUREN NAIDOO: Anthony, we will have to leave it there. Thanks so much for your time. That was Anthony Thunström of Cape Town-based TFG.