The Foschini Group (TFG), a homeware and fashion retailer, believes that rampant load shedding damaged TFG Africa’s retail revenue by around R1 billion due to unexpected expenditures, missed trade hours, and decreased traffic in its stores during the fiscal year 2023.
TFG reported in a trading statement for the fiscal year ended 31 March 2023 that the continued energy crisis and increased load shedding levels had a substantial impact on company operations.
While TFG previously stated that 70% of its sales in South Africa is safe from the effects of load shedding due to the business’s investment in alternative power solutions, the group claimed that operating independently from Eskom is still costly.
To far, the business claims to have spent over R220 million in capital investment on backup systems, with an additional R65 million in unbudgeted direct expenditures for diesel, security, and maintenance.
As a result, TFG believes that load shedding has affected TFG Africa’s retail revenue by roughly R1 billion in FY2023, and by more than R250 million in the last two months alone.
The drop in footfall and trading hours as a result of the power outages exacerbated the losses disclosed.
“TFG lost 345,000 trading hours for the 11 months ending 28 February 2023. The true impact, however, has been estimated at close to double this figure (685,000 lost trading hours) as customer demand is dampened by the associated disruption and inconvenience with reduced footfall observed before, during, and immediately after load shedding periods,” said the group.
“The ongoing energy crisis and elevated levels of load shedding are having a profound impact on South Africa’s economy and society at large, making it difficult for businesses to trade, operate and plan at normal levels,” TFG noted.
“This adds abnormal costs to the business, including the inability to pass on the impact of inflation and the costs of dealing with load shedding to the consumer in full.”
“Further, due to load shedding, retail footfall has declined in some regions, and this, together with a change in consumer spending patterns, has impacted all South African retail.”
These prolonged losses are likely to have an impact on the group’s total retail turnover performance for the year, with the 48 weeks ended 25 February 2023 – excluding the performance of the recently acquired Tapestry business – showing a 1.2% to 11.4% fall in retail turnover of R30.94 billion.
TFG responded by stating that it will improve its independence from the failing national grid by investing an additional R30 million in the next months to increase turnover protection to 80%.
Nevertheless, the company stated that it could only do so much to avoid Eskom and load shedding, stating that backup power solutions are most successful up to and including stage 4 load shedding but are less effective at stages 5 and 6.
Despite this, TFG reported a minor improvement in the first two weeks of March 2023, with TFG Africa’s retail revenue – excluding the Tapestry company – growing by 15.9% to R1.2 billion, up from R1.07 billion in the same time in 2021.
Furthermore, TFG’s new fashion and lifestyle online shopping platform, Bash, was successfully launched in February 2023, and early indications across a number of online performance indicators are highly optimistic, according to TFG.
The firm also stated that it is still seeing favourable outcomes from its investment in the South African market’s value sector following its acquisition of Jet.
“Load shedding in South Africa is expected to continue to significantly impact our business in FY2023 and FY2024. We continue to monitor the impact carefully, but given this prevailing uncertainty, it is difficult to accurately predict the extent of these impacts.
“Considering this, we (TFG Africa) will continue to open new stores in South Africa, in line with our strategy. However, we do so cautiously and responsibly given the current environment,” added the group.
