TFG has cautioned shareholders to expect a weaker earnings outcome for the current financial year, as profit pressure from its overseas operations outweighs continued sales growth across the group. The fashion retailer reported that trading in London and Australia has been more difficult than anticipated, with macroeconomic conditions in those markets showing limited improvement and weighing on profitability.
Group sales rose 7.5% for the year to date and 2.9% in the third quarter, largely supported by the inclusion of UK-based brand White Stuff, acquired in October 2024. Excluding White Stuff, growth was far slower, with sales up 2% over nine months and 1.8% in the third quarter, indicating subdued organic demand across most geographies. Online sales remained a standout performer, increasing 36.6% for the year to date and 23.4% in the quarter, and now accounting for 14.3% of total retail sales, reflecting consumers’ growing shift towards digital channels.
Despite higher revenue, profitability is under strain. The group expects impairments of up to R750m, mainly linked to its offshore businesses, which will reduce reported earnings per share for the year to end-March by at least 20% compared with the prior year. Headline earnings are not expected to be affected, but the scale of the write-downs underscores the extent of the challenges facing the UK and Australian portfolios. UK household spending on discretionary items such as clothing has remained weak amid elevated living costs, limiting scope for margin recovery in the near term.
In South Africa, trading conditions remain constrained as consumers continue to face pressure from past interest rate hikes and high debt levels, even though inflation has moderated and borrowing costs have begun to ease. TFG Africa recorded sales growth of 3.5% in the third quarter and 4.2% for the year to date. The group gained market share in homeware and furniture and maintained its position in apparel. Performance was strongest in homeware, furniture and beauty, while clothing growth was modest and cellular sales edged lower. Online sales in the African business surged nearly 55% in the quarter, driven by the Bash platform, highlighting the increasing role of e-commerce in offsetting slower store-based growth. According to Statistics South Africa, retail volumes have shown only limited recovery, suggesting that discretionary spending remains fragile despite improving inflation trends.
In the UK, overall sales increased as a result of the White Stuff acquisition, but underlying performance deteriorated. Excluding White Stuff, sales in TFG London fell 2.4% in the quarter and 2.6% over nine months, prompting a reassessment of future cash flows and a partial impairment of the Phase Eight brand. Australia also remained under pressure, with sales down 2.6% in the third quarter, and the group signalled that weaker demand and portfolio changes are likely to result in impairments to the Tarocash and yd. brands.
TFG said the medium-term outlook is more constructive, with lower inflation and interest rates expected to support consumer spending over time. However, the immediate outlook reflects a business grappling with uneven regional performance, where growth in South Africa and digital channels is being offset by persistent weakness in developed markets.