Prominent South African retailer set to take R750 million hit

The Foschini Group (TFG) expects to recognise an impairment of about R750 million due to its struggling Australian and UK operations. Paired with only modest growth in South Africa, the retailer finds itself under severe pressure.

TFG is one of the country’s biggest apparel retailers, with well-known brands like @home, Jet, American Swiss, Sportscene, and Total Sports in its staple. It operates in Africa, the UK, and Australia.

On Tuesday, 3 February, TFG released a trading statement outlining its expected results for the year ended 31 March 2026.

In this statement, the retailer said group sales grew by 7.5% for the year to date. However, excluding White Stuff, the UK-based retailer it acquired in 2024, sales grew by a modest 2.0%.

This stands in stark contrast to the retailer’s online eCommerce growth, driven by its Bash platform, which drove group online sales up 36.6% for the year to date, and now contributes 14.3% to total retail sales.

Overall, TFG said its gross profit was up 6.3% in the year to date, but its gross margin decreased by 80 basis points.

The retailer said this reflects the impact of clearance activity necessitated by the challenging trading environment.

TFG specially highlighted South Africa’s challenging consumer environment, saying that spending remained constrained despite moderating inflation and lower interest rates.

However, the retailer also struggled in its TFG London and Australia divisions.

TFG London saw sales grow by 37.2% in British pound terms in the year to date, when including White Stuff. Excluding this recent acquisition, the segment actually saw its sales contract by 2.6%.

Similarly, TFG Australia struggled in the year-to-date period, with sales down 1.9% in Australian dollar terms.

The retailer attributed this to more challenging than expected trading conditions in London and Australia, with macroeconomic conditions showing little improvement.

Taking pain

TFG warned that its struggling Australian and London operations will likely require the group to recognise millions in impairments.

“Reflecting the more challenging outlook, our revised assumptions have required a reassessment of forward-looking cash flows and recoverable values,” the retailer warned. 

“Accordingly, the group expects to recognise non-cash impairments in the current period. These brand impairments may be reversed in future periods should trading conditions improve.”

Within the UK portfolio, TFG said Phase Eight’s performance has been heavily impacted over several years by the decline in department stores, which accounted for 70% of sales when acquired in 2014, to 45% today. 

“The brand continues to focus on growing both its own and selected third-party sales channels, while expanding its customer base,” it said.

“However, the repositioning will impact profitability in the medium term and will require a partial impairment of the brand’s carrying value in the current period.”

Similarly, in TFG Australia, the Tarocash and yd. brands remain profitable. However, the group said current weak trading conditions, as well as the transfer of Tarocash’s traditional “big and tall” business to the Group’s Johnny Bigg label, are likely to require noncash impairments of those brands’ carrying values. 

Overall, the retailer said these impairments may reach up to R750 million, which will impact its earnings per share in its full-year results.

TFG expects its earnings per share for the 12-month period ending 31 March 2026 to be at least 20% lower than the corresponding prior period, i.e. at or below 784.5 cents.

An updated trading statement will be published prior to the release of TFG’s annual results, which is expected to be announced on SENS on or about 5 June 2026.