TFG pins its hopes on aggressive growth

The company’s new strategy includes bolstering its e-commerce platform and entering the UK market

● Fashion and homeware retailer TFG has embarked on an aggressive growth phase that includes adding hundreds of stores. The group is opening five shops daily, bolstering its e-commerce platform and eyeing possible acquisitions in the UK.

TFG owns brands such as Foschini, SportsScene, Jet and @Home, and recently spent R2bn on homeware and furniture group Tapestry, which owns several home brands, including Dial a Bed and Coricraft.

Each TFG store employs between 20 and 60 people. In the half year to September, the company created 6,000 jobs, with thousands more expected to be added as new shops open. TFG has more than 38,000 employees, according to the group’s latest annual report.

“We believe there is still a lot of growth in South Africa. We are confident we can grow organically and still have at least another 1,000 stores with our existing brands,” TFG CEO Anthony Thunstrom said on Thursday.

In the six months to September, TFG opened 159 new stores, with hundreds more expected in the coming months. Most will be outside major centres, where “five years ago we didn’t trade”, said Thunstrom.

New stores will be across all brands, including women’s fashion brand Exact and Jet Home.

“There isn’t a target that we want to be a certain size at a certain time. Just organic growth alone will help us grow revenues in double digits every year,” he said.

In the UK it is eyeing family-owned businesses that are expected to come up for sale. “I think in the next couple of months a number of UK-based home-grown brands will be available,” Thunstrom said.

TFG CFO Bongiwe Ntuli said a number of UK businesses that are struggling to recover from the Covid-19 pandemic and the impact of the high cost of living are family-owned. “There are good brands that are capitalstarved and require lots of investments,” she said.

In South Africa TFG and competitor Mr Price have bought big, well-known brands, Ntuli said there might be smaller offerings.

Mr Price bought Power, Yuppiechef, Studio 88, John Craig, Sidestep and Skipper Bar.

Thunstrom said the group receives a minimum of one approach a week from companies that want to sell.

Commenting on the Tapestry deal, Thunstrom said the acquisition moved TFG to segments in which it has not been. The mattress business is an interesting one — “if you don’t make and sell your own, it’s not a good business to be in because margins are thin”, he said.

TFG is testing an e-commerce platform called bash.com that will consolidate its brands, from clothing to homeware and furniture. It is due to launch in April 2023.

“Bash will be the biggest fashion and lifestyle platform in the country,” Thunstrom said. “Over time we will introduce thirdparty brands.”

According to the CEO, “in 12 to 24 months, South Africans are going to be much more habitualised around online shopping”.

Bash.com will compete with e-commerce fashion sites such as Naspers-owned Superbalist and international fast-fashion company Shein.

In December last year TFG bought courier company Quench to bolster its ambitious growth plans in e-commerce.

Thunstrom said over the past few months the company had been working on improving bash.com’s functionality and had reduced delivery costs and turnaround time.

During Covid-19 it generated 4% of sales online, but that had dropped slightly, said Thunstrom. He expected about 15% of turnover to come from online in the next three to five years.

Thunstrom said TFG had built a platform that enabled it to scale and reposition existing brands.

One of TFG’s biggest advantages is local manufacturing. This helps it to respond quickly to customer demands

The group was looking at tweaking Exact’s offering, which competes with Ackermans and Mr Price. According to Ntuli, Exact’s performance was improving and there would be “more Exact stores now than three years ago. We are trying out new content.”

Thunstrom said before TFG bought Jet it only had Exact in the value segment and “we knew value was important”, but didn’t know how to tackle that market.

He said Exact did not compete well in the segment, being 20% to 25% more expensive than competitors. “When we bought Jet [we] had a person in charge of the value division, which we never had before. In that division we have Jet, Exact, RFO, Sneaker Factory and the Fix. We are now starting to get real economies of scale,” he said.

One of TFG’s biggest advantages is local manufacturing. This helps it to respond quickly to customer demands. Thunstrom said it had taken years to get things right, especially at Foschini, which now has new stock regularly.

In March last year it bought House of Monatics from Brimstone Investments to further strengthen manufacturing.