Shares of The Foschini Group (TFG) dropped by almost 9% yesterday after the clothing retailer said it estimated load shedding had reduced its TFG Africa's retail turnover by about R1 billion in the 2023 financial year.
The share price tumbled 8.88% to an intraday low of R85.62 – and they have dropped by 31.37% in the past six months.
In its trading update for the year ended March 31, 2023, the group said TFG Africa had lost about 120 000 trading hours during the past two-month period due to continued load shedding across all provinces in South Africa, which represented 9.4 times the lost trading hours over the same period in the previous financial year.
This equated to 345 000 lost trading hours for the 11 months ended February 28, 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,” it said.
While TFG said it remained focused on minimising the operational and financial impacts of load shedding, it estimated the financial impact of load shedding to have reduced TFG Africa's retail turnover by R1 billion in financial year 2023, and by more than R250 million in the past two-month period alone.
"The impact of these consistently high levels of load shedding would have been significantly worse were it not for the backup power solutions, which were installed over the past few months and now provide partial mitigation to 70% (by turnover) of our South African stores," it said.
TFG said the ongoing energy crisis and elevated levels of load shedding were 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.
“This is adding 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," TFG said.
TFG said due to load shedding, retail footfall has declined in some regions, and this, together with a change in consumer spending patterns, had impacted all South African retail.
TFG Africa had been negatively impacted by these unprecedented levels of load shedding as it spent R65 million on diesel, security and maintenance.
Capital expenditure was R220m to date on back-up power solutions, and an additional R30m would be spent in the 2023 financial year to ensure 80% (by turnover) of TFG Africa's stores had back-up power over the next few months.
“Back-up power solutions are most effective only up to and including stage 4 load shedding, but are less effective at stages 5 and 6,” TFG said.
For the two-month period, excluding the non-comparative Tapestry Home Brands, retail turnover growth had decreased from 12.6% to low-single digit growth.
"This has in turn reduced retail turnover growth for the 48 weeks ended February 25, 2023, to 11.4%, excluding Tapestry," it said.
Despite this, TFG said retail turnover growth in the first two weeks of March 2023 was more encouraging at 15.9%, excluding Tapestry, against a backdrop of lower levels of load shedding relative to the two-month period.
Tapestry, acquired with effect from August 1, 2022, had performed above expectations.
TFG London and TFG Australia continued to trade above expectation, thereby mitigating, to a certain extent, the load shedding-related pressures in South Africa, TFG said.
Looking ahead, TFG said load shedding in South Africa was expected to continue to have a significant impact on its business in the 2023 and 2024 financial years.
"We continue to monitor the impact carefully, but given this prevailing uncertainty, it is difficult to predict with accuracy the extent of these impacts,“ it said.
BUSINESS REPORT