South African fashion retailer TFG will decide next year whether to continue trading in Kenya and Ghana where it has at least six stores in each market, Chief Executive Officer Anthony Thunstrom said on Thursday.
South African retailers have been performing poorly in the rest of Africa as low economic growth and currency devaluations hit sales. In July, department store chain Woolworths retreated from West Africa for a second time.
“We’ve been very cautious in terms of where we have expanded. Closer to home has been better for us. Much less risky and at the moment we’re doing okay,” Thunstrom said.
TFG will review economic growth, legislature and lease negotiation in Kenya and Ghana before making its decision, Thunstrom said.
“The other difficulty is, because of where the commodity cycle is, government revenues are massively down in those countries. So you get all sorts of funny tax things coming up where suddenly the VAT rate has increased overnight or you can’t claim the input VAT and your cost of business goes up 20%,” he told reporters.
In its South African home market, Thunstrom said TFG will be launching a smaller format Sportscene store that will have entertainment such as a basketball court and a DJ booth, in an effort to lure millennials into its stores and away from online players such as Naspers majority-owned Superbalist.
The new format store will also have a tattoo parlour, a play station and a sneaker cleaning service, he said. TFG’s Sportscene brand sells designer sneakers and athleisure wear.
The store will be launched in September in Johannesburg’s upscale Sandton shopping and financial district, Thunstrom said.
“Consumers do not enjoy shopping, for a variety of different reasons, in big department store formats anymore,” Thunstrom said.
“They (department stores) almost have no customer service, anything you can buy in a department store today you can pretty much buy online or at a specialist retailer and (they) do little if anything to create customer experience.”
In the full-year ended March, TFG reported a 19.6% rise in retail annual sales to 34.1 billion rand ($2.23 billion), while earnings before interest, tax, depreciation and amortization (EBITDA) rose 6.2% to 5.2 billion rand.