Top South African clothing retailer goes from hero to zero

TFG (The Foschini Group) has seen its share price decline by 69% over the last 18 months, shaving R39 billion off its market cap.

In December 2025, TFG was trading at R173 per share, which translated into a market cap of R57 billion.

The share price increased by 80% in less than a year, and the clothing retailer seemed to be doing well.

However, a few major missteps and poor financial results led the market to lose trust in the company, causing its share price to collapse.

One problem is that the management team, led by CEO Anthony Thunström, has not been playing its cards openly with the market.

Shane Watkins, Chief Investment Officer at All Weather Capital, explained that the share price decline was not due to poor financial results.

He previously explained that the TFG management team hid the extent of the problems when they engaged with institutional investors at their capital markets day.

This means the market was surprised by the TFG results, causing many investors to dump the stock.

Daily Investor saw an internal note from one of South Africa’s top asset managers which slated the TFG management team.

The note said that they engaged with TFG in a group setting, which included the chief executive, financial director, and head of retail.

“It was a jarring experience. The management team barely acknowledges that they just put out another profit warning,” it said.

“They try to paint everything in the most positive of lights and blame poor performance on external uncontrollable factors. You would think their business is flying.”

“I’m not sure whether they’re delusional and believe things genuinely aren’t that bad or merely trying to convince the market that things will be okay. Neither is good,” it said.

The writer argued that TFG must be a candidate for a short, especially if the management team has its head in the sand.

TFG is under severe pressure

TFG is under severe pressure, which extends beyond its share price decline and the stagnant South African economy.

TFG’s international expansion strategy has backfired, diluting group returns and adding corporate complexity.

Acquiring the UK fashion brand White Stuff to bolster top-line performance has not worked out as expected.

Sales growth across TFG’s London and Australia divisions turned negative or stagnant during key trading periods.

Earlier this year, TFG announced impairments of approximately R750 million due to its struggling Australian and UK operations.

In South Africa, TFG faces significant challenges due to low GDP growth, high unemployment, and rising input costs.

Increased competition from Chinese e-commerce platforms like Shein and Temu has put pressure on margins.

The group’s gross profit margin contracted to 41.1% from 42.3%, reflecting intensified promotional activity and adverse product mix impacts.

In response, TFG began cutting costs, slowing store expansion, reducing capital expenditure, and closing underperforming stores and brands.

As part of this cost-cutting exercise, the retailer identified about 300 underperforming or loss-making stores and plans to close more than 100 in the year ahead.

As it slows down store expansion and reduces store capital expenditure, TFG will use its Bash online platform and fulfilment network to drive capital-light growth.

Analyst opinion about TFG

Jacobus Brink, a portfolio manager at Sharenet, told Business Day TV that the retail sector in South Africa has taken a beating, leading him to avoid holding any retail stocks.

“Retail is a tough space. The companies operating in the credit space specifically have been brutally sold down,” he said.

If you look at TFG, it’s down 60%. That was mostly driven by another profit warning in May and highly disappointing full-year results released in June.”

He explained that while revenue growth of approximately 7.2% may look fine on the surface, the bottom line is where performance collapsed.

“As we saw with Mr Price recently, the market doesn’t like these companies expanding into offshore jurisdictions,” he said.

“TFG’s strategy of diversifying into the United Kingdom and Australia is currently under heavy scrutiny.”

Chantal Marx, Head of Investment Research at FNB Wealth and Investments, said that TFG has significantly underperformed in the South African market.

“On top of that, you have the added pressure of weak economic growth and Chinese online entrants like Temu and Shein coming through.”

She said that the company’s management team is working to fix what they can internally, which may point to a longer-term investment case for the business.

However, she said she does not expect a market rerating of TFG anytime soon, even with the turnaround initiatives.

Marx explained that the TFG turnaround hinges on their ability to fix merchandising, specifically in women’s clothing.

“The company must also position itself properly from a homeware perspective and open the credit taps when they have the opportunity,” she said.

TFG share price