TRUWTHS:  7,093   -88 (-1.23%)  20/05/2019 00:00

Holiday sales help South Africa's TFG buck retail weakness

By Nqobile Dludla

JOHANNESBURG, Jan 17 (Reuters) - South Africa's TFG (The Foschini Group) said Black Friday sales and good trade across its business in December helped fuel nine-month turnover growth of 22.7 percent, providing some cheer for the retail sector after grim news from Woolworths and Mr Price.

An increase in value-added tax, a rise in unemployment and inflation levels, coupled with higher fuel prices and an interest rate increase in November have all conspired to reduce spending power in South Africa.

TFG, which sells clothing, furniture and homeware, jewellery and cosmetics, bucked the weaker trend for retailers in the country through its broad offering and appeal to the middle market.

Department store operator Woolworths reported slower half-year sales growth and issued a profit warning, sending its shares down as much as 9 percent after disruption from transforming its Australian business David Jones and a significantly smaller winter clearance sale in the first quarter.

Meanwhile cash-strapped low and middle-income earners spent less on clothes at budget retailer Mr Price. It posted a sharp slowdown in third-quarter sales growth, sending shares down 16.7 percent.

"It's a mix bag of numbers that we're getting," Cratos Capital equities trader Greg Davies said.

"You have Woolworths which has the most expensive stuff and nobody went shopping there and then you have Mr Price where you think that maybe people couldn't afford Woolworths so they went to Mr Price, but they didn't go there either."

"So it shows that the top and the bottom ends are struggling" he added.

TFG Africa posted same store sales growth of 6.3 percent in the nine-months ended Dec. 29, while TFG London's comparable sales grew 3.5 percent and 15.6 percent in TFG Australia.

Sales for December increased by 8.3 percent, the owner of @Home furniture and homeware retailer added.

"The impact of Black Friday, in pulling forward what would have traditionally been December sales, is becoming more pronounced, especially in certain merchandise categories such as cosmetics and jewellery," the firm said in a trading update.

Shares in TFG turned positive after its sales figures, rising 3.24 percent.

Later on Thursday peer Truworths International Ltd said group retail sales for the half-year ended Dec.30 grew by 2 percent to 10.5 billion rand and it expected diluted headline earnings per share to drop between 5 and 7 percent.

Some retailers had a breather in November as South African retail sales climbed 3.1 percent in that month as consumers enjoyed the sales opportunities presented by Black Friday.

(Reporting by Nqobile Dludla Editing by Alexandra Hudson)

2019-01-17 18:09:55

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