Switch to local production gives Foschini extra value

JOHANNESBURG - The Foschini Group (TFG) said yesterday that its switch in focus to local manufacturing had stood it in good stead through the lockdown and the staff complement in these operations could increase by “several thousand” from about 550 over time.

TFG chief executive Anthony Thunström said waiting 180 days for a clothing consignment from China was risky in the current environment, given the delivery could be disrupted by the pandemic and even other factors such as the trade war between the US and China.

Thunström said TFG employed about 550 people in local manufacture, and the group would grow this capacity over time.

He said the group was currently able to make and supply its stores in South Africa with clothing in 42 days, providing opportunity to supplement stock that was selling faster, and also reducing the risk of having too much stock that was not selling that well.

Manufacturing in South Africa was “not for sissies” though: there were for instance import duties to contend with, some 50 percent of fabric had to be imported and substantial retraining and re-skilling was required in a sector where there had been decades of under-investment.

He said the pandemic had accelerated many existing shifts in the retail environment.

In the UK, TFG’s stores were achieving up to 35percent of turnover online, and the trend was likely to also be reflected in time in the South African stores.

Contrary to expectations, the surge of online buying in South Africa had not slowed with the easing of lockdown restrictions, he said.

At the end of the last financial year TFG’s South Africa stores were achieving 2percent of turnover through online sales, up from 1 percent at the start of that year, and the figure was 5 to 6 percent year-to-date, said Thunström. “We foresee us reaching up to 20percent online sales in the not-too-distant future,” he said.

There had been sharp growth in casual clothing sales, as people working from home during lockdowns in South Africa, the UK and Australia meant fewer sales of formal and business wear, a trend he expected to see continue for at least six months.

The weak economy also meant TFG had continued to slow its credit sales growth. At one stage in the past up to 56percent of TFG’s sales were on credit, a year ago the figure was around 25percent, but the figure was currently at 15 percent, with some months where this figure was in single digit figures.

“Cash accounts for about 60percent of sales in South Africa, which is a good position to be in at present,” said Thunström.

Another trend that had accelerated was the search for value for money by consumers in all clothing market segments. Market research showed the group's pricing was well positioned to take advantage of this trend, he said.

Inner city centres were experiencing slower footfall growth after the easing of Covid-19 restrictions, while many suburban and rural shopping centres were experiencing double-digit growth, sometimes higher than what was achieved at the same time last year.

Thunström said it may take some time for large inner city shopping centre footfalls to fully recover in South Africa, the UK and Australia, but more so in the UK where there had been a resurgence of Covid-19 infections.

On the recent acquisition of some 420 stores of family value clothing store chain Jet from Edcon, he said a new management team had already been in place at Jet for a year, the “compatibility box has been ticked”, and there would likely be no changes with Jet's management team.

Jet’s stores were, however, still “starved of stock” and trading sub-optimally as a result, but stock was being supplemented with TFG’s local manufacture, and the expectation was that stock levels would recover in the next few months.

TFG also intended to roll out new technology and points of sale devices at Jet stores, and it would also provide Jet with an online presence.

He said they believed Jet’s stores to be understaffed, and its staff levels were likely to increase once the uncertain economic environment improves. There had been more than 500 Jet stores before Edcon went into business rescue.

BUSINESS REPORT