TFG is forging ahead with a major revamp of the 400 Jet stores it acquired from Edcon in 2020 for R480m. The retailer spent R57m revamping 20 of them about six weeks ago, and says the facelift resulted in a 30% increase in sales at those outlets.
“They [the revamped stores] look like world-class value retailers you would have in the US, UK and anywhere else in the world,” TFG CEO Anthony Thunström told Business Times at the release of the group’s half-year results to September.
“Their sales are like 30% up. As a result, their [year-on-year] profit for the first half is up 85%. We have a big fleet of Jet stores still to revamp, and we are going to be doing that more aggressively over the next couple of years.”
Thunström is optimistic. “Jet is sitting on 400 stores across the country at the moment, there are several hundred locations on top of that where we could open Jet stores. The best return on capital at the moment is to revamp,” he said.
TFG closed 37 Jet stores when their leases came up for renewal this year. “Having traded in those stores for three years, you come to the conclusion that they are in the wrong area, they are too big, and maybe the rental is very high, and they could have never worked, and those are the 37 stores we closed,” Thunström said.
He said the lease negotiations in 2020 had to be rushed as Edcon was in financial trouble at the time. “We had to negotiate all of the leases in one go, with all of the landlords, in literally two or three days, and normally you would spend months doing that.”
As a result, TFG management did not have the opportunity to visit each store before finalising the negotiations, although Thunström said the group did a good deal on Jet overall.
We ended up paying a fraction of what the inventory was worth and nothing else on top of that. Those were three-year leases; we did a lot of work fixing the core business over the three years
— CEO Anthony Thunström
“We ended up paying a fraction of what the inventory was worth and nothing else on top of that. Those were three-year leases; we did a lot of work fixing the core business over the three years.”
TFG — which owns Jet, Totalsports and @Home, among others — reported a 2.5% increase in profit to R12.8bn. Its online retailer Bash helped online sales in TFG Africa grow 47.9% to contribute 5.6% to sales.
However, group sales declined 2% due to the difficult trading conditions in all territories.
TFG is bringing JD Sports, a top global brand, to South Africa, with 50 stores set to open over the next five years. It will open a flagship store in Canal Walk, Cape Town, this month and another at the Eastgate Mall, east of Johannesburg, next month.
Thunström describes JD Sports as the leading sports and lifestyle retailer in the world, with a lot of street fashion and street culture. He said it is closer to Sportscene than to Totalsports — both of which it owns.
“Will there be some cannibalisation? I am sure there will be some, we more than planned for that. Where we have, for example, a Sportscene and a JD Sports in the same shopping mall, we are conscious that we do not place the two next to each other and that we spread them out, so you get a different customer coming in,” he said.
Sales at Bash were up, underscoring how e-retailing was gaining momentum, Thunström said.
“South Africa has been behind the rest of the world. If you think about it today, between Sixty60 for your groceries, between Bash for your clothing and everything else, between the pure plays, pretty much everybody is now online shopping in one way or the other, and I would expect that to be a big tailwind for Bash going forward,” he said.
Meanwhile, TFG is hoping new tax measures targeted at Chinese online retailers Temu and Shein will level the playing field and shield local clothing retailers from unfair competition.
Thunström said foreign online apparel retailers were paying only 20% duty on items shipped into South Africa, with no VAT added, while everyone else, whether they operate a physical store or online, was paying 45% duty on imports plus VAT at 15%.
“The international [players] create very little employment in South Africa; we are just one retail group, we have over 30,000 people employed here, more than 6,000 people employed in our factories. We make a massive contribution in terms of GDP, tax and employment et cetera. The minimum any reasonable person would want [international players] bringing clothing in would be at least a level playing field,” he said.
The South African Revenue Service said this month it would introduce the additional measures after concerns were raised that a concession made for those importing goods valued at less R500, under which they only pay a flat rate of 20% in the place of VAT and customs duties, was being misused to import low-value items, especially by Temu and Shein.
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