102-year-old retailer closing hundreds of stores across South Africa

The Foschini Group (TFG) is set to close down hundreds of stores over the next few years, as the retailer faces a weak consumer environment and changing demand.

At the same time, TFG is now banking on its digital channels, particularly e-commerce platform Bash, to remain competitive and drive future growth.

The retailer’s plan to cut hundreds of stores loose over the next few years comes after a period of rapid expansion, largely driven by an aggressive acquisition strategy.

Over the past five years, TFG has pursued an aggressive, targeted acquisition strategy to diversify its brand portfolio and accelerate its digital transformation.

Brands the company has acquired in recent years include Street Fever, White Stuff, JD Sports, Granny Goose, Coricraft, Volpes, Dial-a-Bed, and The Bed Store.

These acquisitions have aided the group’s topline, particularly as organic growth is hard to come by for retailers in a weak consumer environment like South Africa’s.

Aside from diversifying its brand portfolio, these acquisitions have also allowed TFG to expand its manufacturing capability.

However, these acquisitions came at a cost, particularly with TFG’s bottom line having paid the price.

While acquisitions successfully masked the group’s stagnant organic growth by propping up top-line revenue, the same can’t be said for its profit figures.

To fund its continuous string of acquisitions, TFG has had to take on higher levels of interest-bearing debt, which, coupled with a high-interest-rate environment, has seen the retailer’s finance costs skyrocket.

TFG’s total finance costs have nearly tripled over the past five years, going from R783.8 million in the 2022 financial year to R2.05 billion in 2026.

The acquisitions have also opened TFG up to severe brand impairments, with the retailer having seen a devastating R1.02 billion write-down in 2026.

Therefore, while the company has managed to diversify its portfolio and seen remarkable e-commerce growth, it is now saddled with high debt and fragile intangible assets, which have led to a severely contracted bottom line.

To address this, TFG announced an aggressive store rationalisation strategy, with hundreds of stores on the chopping block in the coming years.

The contrast between TFG’s bottom- and top-line performance over the past five years can be seen in the graphs below.

TFG cutting down

Technically, TFG’s store rationalisation has already started, with the retailer having closed a total of 242 stores across its local and global operations in the 2026 financial year.

This includes 98 stores in its London division, 91 stores in Africa, and 53 in Australia.

While these closures were partially offset by the opening of 233 new stores, they brought the group’s footprint down to 4,914 stores across 18 countries.

In the group’s 2026 results presentation, CEO Anthony Thunström said this was only the beginning.

In the year ahead, he said TFG has earmarked just over 100 stores to be shut down, with 300 stores currently considered “marginal”, essentially meaning they are barely profitable. 

The retailer’s latest results explained that it assesses its right-of-use assets for impairment at an individual store level, and stores that show indicators of impairment are typically marginal or loss-making.

The group’s policy now is to potentially close these underperforming locations no later than their next lease renewal date, with most of TFG’s leases being around five years long.

“Even the ones that are loss-making are generally minimally loss-making, and a lot of them have fallen into that bucket over the last six months as things got tighter,” he said.

“They wouldn’t necessarily have been marginal or loss-making 12 months ago. That doesn’t mean we’re not dealing with them.”

TFG CFO Ralph Buddle explained that these marginal stores represent an interesting dichotomy for the company.

There are no real fixed costs associated with a store, and the marginal stores themselves can cover their variable costs.

“But that’s not good enough. They don’t generate the returns, and therefore, they lower the average returns over the whole shape of the chain,” he explained.

“By being much more focused on eliminating the marginal stores, we increase the average. But, we then have to take out overhead at the centre to cater for that smaller base.”

Analyst opinion

Otto1890 senior equity analyst Alec Abraham told Daily Investor that TFG’s aggressive rationalisation of its store footprint will serve the company well in the years to come.

“The company has been on a multi-year expansion in terms of store base and brands. This was to fuel growth, but also to grab space or taste trends in a growing market before competitors,” he said.

However, he explained that the reality of the retail industry is that demographics constantly shift and buying patterns change.

In South Africa, consumers have also been under pressure for more than a decade, due to the country’s stagnant economy and lacklustre growth.

“So, areas that were once promising have not delivered,” Abraham said, meaning the market for specific styles or tastes did not grow to ensure the relevance and returns of certain chains or brands.

At the same time, TFG has seen its digital channels grow far quicker than expected, with its Bash platform having become a notable catalyst for e-commerce growth over the past few years.

In 2022, online retail turnover contributed only 3.1% to TFG’s Africa segment’s total turnover. By 2026, TFG Africa’s online sales jumped by 49.2%.

Abraham believes that updating TFG’s stores and brand fleet to better align with these shifts will certainly improve the retailer’s profitability, reset its cost base, and free up resources for development into new growth nodes. 

“Another company that has benefited from such a store fleet streamlining in recent years is Mr Price,” he said.

While TFG appears to be on the right track, Abraham warned that the problem with retail is that it is nearly impossible to gain a lasting competitive advantage in a constantly evolving consumer environment.

The only true way to gain an advantage is to try to stay relevant on a sustainable basis and hope that South Africa’s economy will one day support widespread income growth.