TFG upbeat about growth despite load shedding, economic pressures

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Fashion and lifestyle retail group TFG grew retail turnover for the first half of the financial year by 23.5%, boosted by its Tapestry Home Brands acquisition, local clothing manufacturing drive and continued store rollout and upgrades.

TFG CEO Anthony Thunstrom. Source: Supplied

The group, which owns retailers including Foschini, Markham and @home, said it achieved this turnover without sacrificing margin as demand for its products continued to increase and resulted in gross profit growth of 24.8% to R11.6bn. Strong trade, along with the company’s continued focus on resetting the cost base, delivered growth of 44.5% in earnings per share.

This was achieved despite continued disruptions in all territories during the period, including increased levels of load shedding in South Africa where close to half a billion rands of turnover was lost, severe flooding in Australia and double-digit inflation in the UK.

TFG Australia turnover grew 48.7% and expanded gross profit margins by a further 4.9%, while TFG London achieved top-line growth of 21.2%, against a backdrop of cooler consumer spending with operating profit margins of 8.0%.

132,000 trading hours lost to load shedding

“In TFG Africa, the post-pandemic economic recovery is progressing gradually, showcased by surprising resilience in consumer spending, despite the high unemployment rates, reduced consumer confidence and increased levels of Eskom load shedding,” said TFG CEO Anthony Thunström.

The spike in load shedding resulted in approximately 132,000 lost trading hours during the first half of FY2023. This was 2.6 times more than the trading hours lost during the comparative period.

The impact of load shedding is being mitigated by investing in backup power solutions, installed across stores throughout South Africa. TFG has also deployed mobile point-of-sale devices across key stores to enable trade during load shedding.

Bash and TFG Rewards

In June, TFG launched in beta a new fashion and lifestyle shopping platform, Bash. This platform will become a home for all of TFG’s brands as the group pursues its vision of “creating remarkable omnichannel experiences” for its customers. At full launch the platform will offer more than 100,000 SKUs, eclipsing local competitors.

The group also continued to grow its Rewards customer base, adding approximately a million new members in the year to date and bringing the total to almost 30 million.

“One out of every two South Africans is now a TFG Rewards member – and we are working on the rest,” said Thunström. “Rewards customers are proven to represent significantly higher value, are higher frequency shoppers with TFG and have a higher uptake of value-added services.”

The group continued to invest in its extensive store build-out and opened 159 new stores in the period. These openings, along with a continued programme of store refurbishments and right-sizing translates into the group delivering an average of two store projects a day.

Tapestry deal

TFG outperformed market growth in both apparel and homeware categories.

In apparel, TFG said that growth was driven by strong speciality brands, the group’s sourcing and quick response advantage through local manufacture, and store build-out, particularly in non-metro areas. In homeware, the sustained expansion of the Jet Home format and stores, and the diversification across income segments and fashionability categories through the acquisition of Tapestry, contributed to robust growth, the group said.

“Since the acquisition of Tapestry Home Brands from 1 August, we have integrated that business and introduced TFG credit to all Tapestry stores. Furthermore, we have leveraged our group scale to secure key new locations for the Tapestry brands,” said Thunström.

“The acquisition seeks to provide the group with exposure to new and diverse products and categories as well as gaining new customers to complement the TFG customer base in existing categories. The transaction is in line with TFG’s stated strategy of vertical integration in key product categories and the continued development of its quick response local manufacturing capability.”

6,000 new jobs in 6 months

“The group continues to demonstrate its resilience and agility and is best positioned to trade through cyclical headwinds and stretched consumer wallets in all our territories,” said Thunström.

“We continue to invest in our key strategic initiatives to further strengthen our differentiated business model. We have made progress on our strategic objectives and speciality brand business portfolio, and continue to eye organic and inorganic growth opportunities. A specific focus will be on the Tapestry business to maximise the value from our investment,” Thunström said.

“In the context of TFG’s investment in excellence, and particularly in people that have the potential to drive change in South Africa and TFG, I’m especially proud of the more than 6,200 jobs we have added over the past six months and the launch of the Data Science and Leadership Fellowship, which will fund outstanding young South African students in the field of data science.

“Additionally in the last six months, TFG has established a Sustainable Design Incubator which is already supporting its first cohort of young emerging designers.

“These are prime examples of our commitment to sustain ourselves and our stakeholders into the future through fashion that connects, shares and restores,” Thunström said.

Cape Union Mart Group launches design studio to drive localisation

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Article by Lauren Hartzenberg on BizCommunity.

 

With a goal to produce 65% of products locally by 2028, the Cape Union Mart Group has launched the Green Thread Studio, a creative hub to facilitate the growth of local clothing design and production.

Credit: Tegan Smith Photography

The design studio will be the core design and production hub for Poetry, Old Khaki and Keedo, and its establishment has created 220 jobs in manufacturing and 33 in design.

“We have a multi-billion rand investment in this country. We’ve got a massive distribution centre, we’ve got two factories that employ nearly 600 people. We have some 300 stores, and we have over 3,300 employees. We are totally committed to South Africa,” Cape Union Mart Group’s executive chairman Philip Krawitz said at the launch event.

Credit: Tegan Smith Photography

The family-owned retail group plans to provide its retailers with more product lines that can be made locally at a competitive price, with the same (or better) quality standards expected from international suppliers. By accelerating localisation efforts, it also aims to support communities with job opportunities and generate more business for local fabric and trim SMME suppliers.

The group has set itself the target of running 280,000 units and 385 styles through the design studio in 2023, and aims to grow this to 360,000 units with more than 500 styles in 2024.

“We’re more than just creating jobs, we’re thinking ahead. We’ve always sent buyers overseas to see what styles are available … What’s wrong with us? We’ve got great creative people, people with incredible imagination and wonderful taste. We have to change the negative mindset that everyone overseas is better, because local is lekker. Let’s have faith in South African design and creativity…” said Krawitz.

The Green Thread Studio will give the company better control over the evolution of product creation, and allows for closer collaboration between buyers, designers and production teams.

Krawitz added, “Most of the big retailers are wanting to convert more production locally, especially on the back of a challenging two years which has made everyone aware of the risks of supply chain. To produce locally, businesses need to have the correct set-up to support this strategy, and we wanted to set ourselves up for this growth according to best practice.”

Cape Union Mart Group executive chairman Philip Krawitz. Credit: Tegan Smith Photography

Upskilling new talent

Growing local production often requires an investment in manufacturing training to allow for the transfer of technical skills developed by previous generations of pattern makers, cutters and machinists who worked in SA’s apparel industry when it was globally competitive. Training can also equip manufacturers and suppliers to build production capacity sustainably.

Cape Union Mart Group owns two factories in Cape Town – K-Way Manufacturers in Ottery, which produces for Cape Union Mart, and Green Thread Manufacturers in Paarden Eiland, which produces for the group’s other retail brands and from which the new design studio has been created.

Credit: Tegan Smith Photography

The group has been aiding the introduction of fresh talent into the clothing manufacturing industry, with facilities to train and upskill newcomers with the aim of creating employment for them.

There is a great focus on ensuring the machinists are multi-skilled and able to flex to different commodities as the needs and demands change relating to trend and supply. According to the company, this is a major consideration in safeguarding the success of the group owning its own CMTs.

Streamlining production: from conception to creation

As a design-led retail group, it made sense to invest more in the design segment of the business, Shelley Prinsloo, GM of Poetry and Green Thread Studio, said during the event. She explained that having the design operation previously located in Paarden Eiland wasn’t ideal, and that bringing the design centre closer to the head office could improve collaboration so that “every design element was considered and designed from conception stage to production.”

Now, with the Green Thread design studio located alongside the retail group’s head office in the Cape Town city centre, it provides the opportunity for buyers and designers to work closely side-by-side on creating and reworking products as needed.

Credit: Tegan Smith Photography

On the ground floor of the design studio is a small factory focused on pre-production manufacturing, shortening the time between conception of an idea to the mock-up of a product. By producing more locally, Cape Union Mart believes it can improve efficiency and ramp up speed to market.

Prinsloo said, “We’re conscious about streamlining our production lead times. For every style that you create there are often multiple samples that get exchanged between the buying team and the supplier. What the design centre enables is for the buyers and designers to work closely together. It eliminates some of the wastage and it also reduces carbon emissions because we’re not transporting samples all around the world.”

Sustainability was a core value that drove the creation of the Green Thread Studio. According to the group, it’s now better equipped to develop and evolve its fabrics and fabric prints with a focus on increasing the number of sustainable fabrics used.

Determined to eliminate materials going to landfill, the group employs a minimal waste approach where fabric off-cuts are upcycled to minimise the amount of waste that occurs through sampling. About 500kg of offcuts are rewoven and reused monthly by the group, and scraps are also donated to NGOs that upcycle them into products that they sell.

“Sustainability is really a journey on its own and we’re learning as we go. We’re bringing it to the forefront of our thinking. Our design ethos has always been to put endurance, style and quality first, and this ethos has given birth to our commitment to sustainability,” Prinsloo said.

Truworths plans major new distribution centre in Cape Town

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Truworths has signed a deal to build a new “world-class” Western Cape distribution centre in Cape Town’s King Air Industria, an Atterbury Property and Old Mutual Properties industrial development.

Source: Supplied

The project is a joint venture between King Air Industria and Truworths Limited.

Consolidating Truworths facilities

Developed by Atterbury and tailor-made for Truworths who will lease the facility, the new building will consolidate Truworths’ various Cape Town facilities under one roof.

The development’s 53,000m2 initial phase consists of a 3,000m2 office and 50,000m2 warehouse and includes the option to expand to 70,000m2.

Designed to target an internationally recognised Excellence in Design for Greater Efficiencies (EDGE) sustainability certification, the new development for Truworths is due to break ground in October 2022 and the building is due for completion in September 2023.

Source: Supplied

Emanuel Cristaudo, chief financial officer of Truworths, comments, “As a result of business growth we have spent some time looking to build a larger, state-of-the-art, distribution centre to accommodate our future requirements.

“The proximity of King Air Industria and the business park benefits have led us to conclude an agreement with Atterbury who we also feel has a good understanding of our warehousing business needs. This positions us well for the future and we are looking forward to the completion of this project.”

Prime position

Arno du Plessis, Atterbury’s development manager for King Air Industria Cape Town, says, “Truworths is an excellent addition to King Air Industria Cape Town, and we are excited to be working with this leading national and international retailer.

“The development rollout of King Air Industria is making excellent progress and attracting a high calibre of businesses that want to be near the airport, but also seek quality, efficient premises that support both their business and sustainability goals.”

Atterbury notes King Air Industria’s easy access to Cape Town International Airport cargo terminals as a significant advantage. It is located between Airport Approach, Borcherds Quarry, Robert Sobukwe and Pallotti roads and connected to the city and inland region with easy access to the N2 highway and the R300 freeway.

The 72ha King Air Industria Cape Town is already home to The Courier Guy operating in a 10,112m2 turnkey facility, and Morgan Cargo in a 7,500m2 provincial head office building that also includes a specialised cold storage facility.

At other properties, Atterbury also recently signed a deal with Takealot for a 20,400sqm second phase of its Richmond Park distribution facility, which will take the facility’s total size to 44,000m2 when it is completed in June 2023. It also signed hardware retailer Brights for 6,000m2, which will be completed in November 2023.

Retail and the metaverse: A new world of consumer connection

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The metaverse could be a market worth $800bn by 2024, according to Bloomberg Intelligence. Although not a new concept and with a long road ahead, the word “metaverse” has been on everyone’s lips since Facebook rebranded itself as Meta and thus positioned itself as a major player in the new virtual world.

Cezar Pereira, strategic account director at Tiendeo, a company that specialises in the digitalisation of the retail sector, poses the following question: Are we facing a fleeting fad or a new world that is opening the doors to a powerful business model? He invites us to ask ourselves what we think of the metaverse, to enter this world to find out how it is changing people’s lives, the opportunities it offers retailers and brands to connect with the consumer.

A new universe in the making

The metaverse is a virtual space that we can connect to through devices such as virtual reality (VR) and augmented reality (AR) glasses or helmets and applications that offer the promise of an immersive experience that feels like we are actually there, interacting with other people and objects.

In this alternative world, everything will be possible through an avatar: buying goods and services, attending concerts, travelling, playing games and even working. Pereira states that the amazing thing about this universe is that you can teleport from one experience to another without leaving your room. The development of the metaverse seeks to extend the real world into the virtual world by making everyday actions into a spectacle.

Of course, it will be necessary to understand a necessarily complex universe, made up of not one but dozens of metaverses. In the United States, for example, there are four major companies competing to be number one in the race to dominate the metaverse: Meta (Facebook), Roblox, Fortnite and Microsoft, as well as other technological giants that will also set the tone for this industry in the coming year.

What makes the metaverse so appealing?

The great potential of this technology as a business model is what has led several companies to create their own “omniverses”. Pereira says that to be successful they must understand that the user ventures into the metaverse to escape from the real world, because it offers them the alluring possibility of creating their own personality: to show themselves as they “feel” they are and not how they are physically, taking the user experience to another level.

This introduces a new form of interaction between consumers and brands through the D2A (direct-to-avatar) model where we will no longer buy clothes for ourselves, but for our representation in the metaverse. The challenge for companies will be to get people to carry out the bulk of their activities in this digital universe, just as we do in the physical world, giving rise to virtual marketplaces that already move large sums of money.

This is not so far-fetched in an age where humans are already glued to technology, whether professionally, socially or both, and it is speculated that by 2030 we will spend more time in the metaverse than in “real life”. As such, the desire to dominate the new virtual spaces reveals an eagerness to control the way people interact with each other, says Pereira.

Metaverse at the forefront of retail

He adds that the opportunities offered by the metaverse are endless, especially in the field of commerce. Technology company Wildbytes estimates that in the next five years, 70% of major brands will have a presence in the metaverse. By 2023 some companies are already promising to launch a new product while others are already looking at the possibility of creating shopping centres, boutiques and virtual shops where avatars will be able to buy NFT products and pay in cryptocurrencies.

The retail sector is one of the most heavily invested in the metaverse. For example, Gucci has already started selling its own virtual clothing, the Gucci Virtual 25 trainers and H&M has recently launched its first virtual collection through Nintendo’s social simulation game Animal Crossing.

Ikea also uses AR technology in its app to allow customers to create their own spaces and see how furniture would look in the physical world using AR technology.

There are brands that go even further and have no hesitation about making a clear commitment to the metaverse. This is the case for Nike, which has gone so far as to create its own virtual universe: Nikeland. A space that offers access to various sporting arenas, as well as a showroom where users can equip their avatars with Nike shoes to take part in competitions.

The brand also uses it as a testing ground so that younger generations can experience its new products through avatars before purchasing them in real life.

In short, Pereira says the metaverse revolution holds the promise of a digital experience in which the virtual world and the real world intertwine and merge under a single reality. It is now up to brands and retailers to find their place in it and explore its full potential.