<\/p>\n
Apparel and home retailer TFG says it shuttered around 100 loss-making stores in the past year and will close \u201cjust over 100\u201d more in the year ahead as it looks to boost margins in the medium term.<\/p>\n
CEO Anthony Thunstr\u00f6m says the group generally has a weighting towards a two-and-a-half-year end to its leases as its leases tend to be five years in duration.<\/p>\n
This means it can only address a certain number at any point in time; however, it continues to deal with these issues.<\/p>\n
Read:
Investors dump TFG as retailer warns of sharp earnings decline
\u2018Out of favour\u2019 Truworths overtakes TFG as missteps wipe out nearly R20bn
TFG takes earnings hit despite sales growth<\/p>\n
In its full-year results presentation to 31 March, Thunstr\u00f6m admitted that it currently has \u201cabout 300 stores\u201d that are marginal.<\/p>\n
\u201cEven the ones that are loss making are generally minimally loss making, and a lot of [those] have kind of fallen into that bucket over the last six months as things have got tighter.\u201d<\/p>\n
He did add that they \u201cwouldn\u2019t have necessarily been marginal or loss making 12 months ago\u201d and that the group will shut the stores \u201cas quickly as we can, given the lease profile\u201d.<\/p>\n
Perspective<\/strong><\/p>\n CFO Ralph Buddle highlights that there are \u201cno real fixed costs to a store, [and] the marginal stores in themselves cover their variable costs, but that\u2019s not good enough\u201d.<\/p>\n \u201cThey don\u2019t generate the returns and therefore they lower the average cost of returns, the average returns over the whole shape of the chain. So by being much more focused on eliminating the marginal stores, we increase the average, but we have to then take out overhead at the centre to cater for that smaller, smaller base.\u201d<\/p>\n He says the group trimmed its capex in the second half, with around R200 million of the R500 million planned not executed.<\/p>\n ADVERTISEMENT<\/p>\n CONTINUE READING BELOW<\/p>\n<\/div>\n<\/div>\n<\/blockquote>\n \u201cWe won\u2019t shy away from developments that we believe are still right, but we are tightening our hurdle rates and payback criteria \u2026 Stores are a high fixed cost asset in a structurally declining channel.<\/p>\n \u201cOur job is to ensure that the fleet remains profitable by managing it with total discipline and closing without sentiment. Every store in every brand must earn its place.\u201d<\/p>\n Along with this, it has implemented \u201csignificant short-term cost savings and avoidance, including \u2026 aggressive head office and store reductions in Australia and London\u201d.<\/p>\n Buddle is adamant that the capital expenditure for 2027 will be lower than the amount for 2026.<\/p>\n Strategic reset<\/strong><\/p>\n Thunstr\u00f6m sketches a path forward for the group where it is \u2018resetting\u2019 \u201cto enhance both profitability and capital returns\u201d.<\/p>\n \u201cWe are planning on the basis that consumer conditions will remain under pressure for some time across each of our territories and may potentially deteriorate further until a durable solution is found to the Iran war, inflation cools and consumer sentiment improves.<\/p>\n \u201cHow we are going to run our business is directly aligned with this cautious outlook,\u201d he adds.<\/p>\n Listen: The Fog of War makes investment decisions tough<\/p>\n \u201cTurnover growth may well be muted, but we will manage inventory and gross margins very carefully and in line with this reality.<\/p>\n ADVERTISEMENT:<\/p>\n CONTINUE READING BELOW<\/p>\n<\/div>\n<\/div>\n \u201cWe are going to continue to manage costs very tightly as we extend the cost saving initiatives of last year. Capital is being held tightly with investments proceeding only where the business case is significantly de-risked and yet still compelling.<\/p>\n \u201cStrategically, we are looking at ways to aggressively reduce structural operating expenses to de-risk operational leverage.<\/p>\n \u201cWhile this approach will apply across the entire business, we also have very specific initiatives and levers applicable to each territory,\u201d he adds.<\/p>\n<\/blockquote>\n \u201cWe are also reviewing marginal brands and rationalising our brand structures. Our Africa business has assembled an incredible portfolio of 28 loved brands over many years, which have helped us to more than double the Africa business over the past 10 years.<\/p>\n \u201cHowever, as I have already pointed out, growth comes at a cost, and the portfolio breadth has increased complexity and diluted returns in a tough market. There is a need for us to simplify our structures and structurally reduce our cost of doing business.\u201d<\/p>\n Reading between the lines, it is clear that some of its almost absurd number of brands will be rationalised over the next 24 months.<\/p>\n<\/blockquote>\n In jewellery, for example, it has three whole brands \u2013 American Swiss, Sterns and Galaxy & Co \u2013 all doing roughly similar jobs.<\/p>\n It will continue to prioritise Bash, its online and omnichannel platform. \u201cTo put this into perspective, the additional R1.1 billion of sales generated by Bash this year would have needed the equivalent of opening more than 100 new stores,\u201d says Thunstr\u00f6m.<\/p>\n \u201cAchieving the same outcome through physical expansion alone would have required approximately R500 million in store Capex and inventory investment.\u201d<\/p>\n TFG share price<\/strong><\/p>\n<\/p><\/div>\n #TFG #shut #hundreds #lossmaking #stores #part #reset<\/p>\n","protected":false},"excerpt":{"rendered":" Apparel and home retailer TFG says it shuttered around 100 loss-making stores in the past year and will close \u201cjust over 100\u201d more in the year ahead as it looks… <\/p>\n","protected":false},"author":1,"featured_media":6189,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[7569,8644,2982,2153,4487,1078,4523],"class_list":["post-6188","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-hundreds","tag-lossmaking","tag-part","tag-reset","tag-shut","tag-stores","tag-tfg"],"_links":{"self":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts\/6188","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6188"}],"version-history":[{"count":0,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts\/6188\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/media\/6189"}],"wp:attachment":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6188"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6188"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6188"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
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