Bumper December sales buoy TFG
TFG Africa grew turnover 6.6%, much of this from opening more stores since same-store turnover growth was 1.7%
TFG’s decision to ride the Black Friday bandwagon appears to have paid off and the retailer says “very strong” trading on November 24 was followed by a better-than-expected December in which consolidated turnover climbed 31%.
This was despite cutting prices in its TFG Africa division, where deflation averaged 0.7%, according to a sales update released on Tuesday.
Sentio Capital portfolio manager Imtiaz Suliman said the key was that TFG’s cash sales had jumped 11.9% over the month.
He said “cash sales were a litmus test for whether the fashion is acceptable — so it shows that their product was very good and accepted by the market”.
TFG’s bumper December was, however, flattered by its November acquisition of fashion house Hobbs, one of UK royal Kate Middleton’s favourite high-street brands, which drove TFG London sales almost 64% higher in sterling terms.
TFG Australia was also included for the first time and traded above expectation, according to the statement.
TFG Africa, which includes SA, showed more muted turnover growth of 6.6% for the month, with same-store sales only 1.7% higher.
Still, that compares favourably with Woolworths, which on Tuesday revealed a 3.4% slide in like-for-like fashion retail sales over the first 26 weeks of its financial year, notwithstanding an increase in its prices.
The update has helped validate TFG’s recent share-price run: the group’s stock gained almost 21% in December alone and was 5.1% higher on Tuesday to close at R181.
The retailer’s turnover gain in its Africa division is wholly due to clothing sales, which grew 11.4% and 5.9% on a same-store basis, helping lift nine-month sales for the region to 8.5% in absolute terms and 3.7% for same stores.
But TFG’s @home division is battling and was the second-weakest performer in the group with a contraction of almost 6% in same-store sales, while cellphone sales for the month of December slumped as much as 13.8% on a like-for-like basis.
Still, fashion accounts for 78% of the Africa business, according to Suliman.
He attributes TFG’s recent share price gains to the fact that local fund managers were “massively underweight” on South African stocks heading into the governing ANC’s elective conference.
“This is just further confirmation that things aren’t as bad as everyone thought, so hopefully with confidence returning it gets better from here,” he said.