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- Stage 6 load shedding cost TFG R400m in lost sales in its half-year to end-September, but it still grew its profits by almost a quarter.
- The Foschini owner plans to ensure 70% of its South African stores have back-up power by Christmas.
- As part of its power strategy, the company has become the largest single South African customer of Tesla's Powerwall batteries.
- For more financial news, go to the News24 Business front page.
Foschini-owner TFG says unprecedented load shedding in September cost it R400 million in lost sales and plunged it into temporary dip for the first time since the hard lockdowns at the beginning of Covid-19.
But the group says it is advanced in its plans to significantly mitigate the effect of load shedding, and plans to have 70% of its South African stores’ turnover protected by backup power by Christmas. As part of its backup power strategy, the company last month indicated that it was the largest single customer of batteries manufactured by Elon Musk’s Tesla.
Speaking at an investor presentation after the release of results for the six months ended September, CEO Anthony Thunstrom said the intense load shedding of up to Stage 6 in the last couple of weeks of September had a far greater effect than lower levels of load shedding. It also meant that many of its stores were closed for "at least six hours a day" and that it was "clearly not easy to trade under these circumstances".
"To put this into perspective, we were growing at strong double digits (sales) for the first half of September and then went into negative growth for the second half of the month, the only time we’ve been in negative territory since the first two months of Covid. Then we bounced back to double-digit growth for October, when we had lower levels of load shedding."
Thunstrom said the R400 million in lost turnover translated to about R200 million in lost profits for the company, which owns a host of brands in SA, among them Jet, Sportscene, Totalsports and @home. Despite this effect, the group said its performance was pleasing, especially given inflationary pressures, reporting continued market share gains as its gross profit increased 24.8% to R11.6 billion.
Power plans
He said that the group was in the middle of an "unprecedented, accelerated rollout of backup power solutions" across its South African store base to help it mitigate the impact of load shedding, given the unfortunate reality that it is probably not going to cease any time soon".
"We plan to have close to 70% of our South African stores' turnover protected before Christmas. This is going to cost in the region of R200 million in additional capex, some of which we will fund from other budgeted capex projects. But really, not taking these measures isn’t an option at the moment. We are also actively engaging with landlords to encourage them to equip their centres and buildings with solar power and backup."
Thunstrom told News24 the group had taken a scientific approach to its backup power rollout, looking at protecting the stores that produced the greatest turnover and profit.
"We basically bought up pretty much every Tesla battery and alternate batteries and lithium batteries that were available in South Africa. That was actually the limiting factor. If we could have done 100%, we would have done 100%, but you’ve got to start somewhere."
He said TFG had seen when it was piloting Tesla Powerwalls that where it is "one of the few stores in a shopping mall that is lit up, whoever is around there has gone into our stores and we have traded relatively well".
At the same time, Thunstrom said it was still "definitely not the same as trading when there is no load shedding".
Feeling impact of load shedding
"Even with the best backup in the world, even if your store is lit and your point-of-sale works, and everything is working off batteries, you will never do the same trade as you would if there wasn’t load shedding. When there is load shedding, it’s not just about whether your store is lit up. It also depends if you’re in a shopping mall and depends to what extent the shopping mall is lit up.
"And even beyond that, particularly with the higher levels of load shedding, consumers don’t want to get in their cars, they don’t want to sit in traffic when traffic lights aren’t working and they’re not sure if stores will have power or not so a lot of them just stay at home."
TFG posted what it called a "record first-half performance for the financial year 2023", growing retail turnover by 23.5% "off the back of continued market share gains" and like-for-like turnover growth of 11.4%.
The company also said that it had also "achieved outstanding performances in its UK and Australia businesses".
The group kept its interim dividend at 170c, the same as in the previous year. In afternoon trade on Friday TFG's shares were down 4.08% to R113.15, having lost about 8.5% so far in 2022.
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