TFG bucks trend of entry into Australia
Group to open six stores under one of its SA brands in October 2018
TFG — the owner of Foschini, Totalsports and Markhams — expects a strong performance from its Australian business in the first half of its current financial year, outgoing CEO Doug Murray said on Thursday.
TFG, which will issue a trading update with guidance on interim earnings next week, plans to open six stores under one of its SA brands in Australia in October. TFG will open the first five stores before Christmas, and the last before the end of March, Murray said.
In 2017, TFG bought Retail Apparel Group (RAG), an Australian menswear apparel retailer, for A$302.5m.
The expected strong performance from the Australian business validates TFG’s strategy to give management of the business a free rein.
"It has been important to have on the ground competent people who fit with our culture and can be part of the greater TFG," Murray said.
TFG had confidence in the "solid and stable" management team in Australia, Murray said. "It is not us trying to do it from here. We have seen other people do that and they fail miserably," he said, without naming fellow retailer Woolworths whose entry into the Australian market has been disastrous.
In the year to end-June, Woolworths reported an after-tax loss of R3.5bn after a R6.9bn impairment of its department store chain David Jones.
Murray said next week’s trading update will give an indication of the success of TFG’s foray into Australia.
"We have a team that is very successful. The numbers will speak for themselves. They know what they are doing," said the CEO.
Murray will formally step down at the retailer’s annual general meeting on Monday and will be replaced by current CFO Anthony Thunström.
"Succession is a process that we signalled to the market approximately two and a half years ago. It is not something that is new to the market. We were pretty sure even that the successor would be an internal candidate," Murray said.
The company has transformed itself tremendously since he took charge 11 years ago, he said. At the time, the company’s revenue was R7.2bn and had 1,332 stores. It now has 4,034 outlets in 32 countries.
In the year ended March 2018, TFG’s turnover was R28.6bn. Murray said the turnover in the current financial year would be more than R30bn. TFG’s share price has risen from R52 in September 2007 to R176.32 at the close of business on Thursday.
Thunström said TFG was restructuring its British businesses — Phase Eight, Hobbs and Whistles — as a precursor to bolt-on acquisitions in the tough UK market.
The streamlining, which will see the UK entities mirror the business model of their SA and Australian counterparts, entails the centralisation of the back offices of the businesses.
TFG was concerned that the UK businesses were run as three separate ones, "with three head offices, separate accounting systems and separate online systems", Thunström said. The restructuring will steer the businesses towards a shared service business model.