The Foschini Group (JSE:TFG) News - Trading update for Q1 FY2023 and update on the acquisition of Tapestry Home Brands Proprietary Limited

THE FOSCHINI GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1937/009504/06)
Ordinary share code: TFG
ISIN: ZAE000148466
Preference share code: TFGP
ISIN: ZAE000148516
(“TFG” or “the Company” and together with its affiliates “the Group”)

TRADING UPDATE FOR Q1 FY2023 AND UPDATE ON THE ACQUISITION OF TAPESTRY HOME BRANDS PROPRIETARY LIMITED

TRADING UPDATE FOR Q1 FY2023

  -   Group retail turnover growth of 16,3% was delivered against a very high
      base due to the COVID-19 recovery in Q1 FY2022;
  -   Above expectation performance from TFG Africa with retail turnover growth
      (excluding any non-comparative acquisitions) of 11,2% in Q1 FY2023
      compared to Q1 FY2022 (like-for-like retail turnover growth of 7,1%);
  -   This performance was underpinned by the Clothing (up 13.1%) and Homeware
      (up 17.4%) categories showing strong growth on Q1 FY2022. These categories
      delivered market share gains of 30 bps and 110 bps respectively, as
      reported by the Retailers’ Liaison Committee (RLC) for the 2 months ended
      May 2022 (latest available data);
  -   Cash retail turnover growth for TFG Africa of 10,2% compared to Q1 FY2022.
      Cash retail turnover now contributes 68,8% to total TFG Africa retail
      turnover;
  -   Continued strong performance from TFG Australia with retail turnover
      growth of 15,7% (AUD) compared to Q1 FY2022;
  -   TFG London continued its strong performance trend in Q1 FY2023 with retail
      turnover growth of 39,9% (GBP) compared to Q1 FY2022; and
  -   Group online retail turnover growth of 13,2% compared to Q1 FY2022,
      contributing 9,7% (Q1 FY2022: 10,2%) to total Group retail turnover.

OPERATING CONTEXT

The Group had a strong start to the 2023 financial year, despite facing several
headwinds. In South Africa there were increased levels of load shedding leading
to lost trading hours, and trading was also impacted by the non-payment of the
COVID-19 social relief of distress grant. The weakening exchange rate and
increased inflationary pressure put further pressure on consumer spending. In
the UK, inflation has accelerated to the highest levels since the early 1980s
and is expected to breach double digit levels by the end of the calendar year.
While the solid recovery from the COVID-19 pandemic continued in Australia,
increasing fuel and housing costs have started to drive up consumer prices.

ESKOM LOAD SHEDDING

TFG Africa lost a further 33,000 trading hours during the quarter due to
continued load shedding across all provinces in South Africa. This represents a
13,2% increase on lost trading hours in the same period in the previous
financial year.

TFG AFRICA PERFORMANCE UPDATE

TFG Africa’s retail turnover grew by 11,2% during Q1 FY2023 compared to the same
period in the previous financial year. All merchandise categories, except
Cellphones (impacted by continued supply shortages), grew retail turnover during
Q1 FY2023 compared to the corresponding period in FY2022. Retail turnover growth
was achieved despite the challenges mentioned above, and yet again supported by
the Group’s strong localised, quick response clothing supply chain and sourcing
model, which shielded the business from continued international supply chain
disruptions.
TFG Africa’s like-for-like retail turnover performance has been encouraging with
growth of 7,1% in Q1 FY2023 while a high proportion of sales were full price
sales which contributed to margin improvements.

The growth/(decline) in TFG Africa’s retail turnover compared to the same period
in the previous financial year in the respective merchandise categories were as
follows:


                                                 Q1 FY2023
                                              Contribution
                                                    to TFG
                                         Q1         Africa
                                Apr 2022 to         retail
Merchandise category               Jun 2022       turnover
Clothing                              13,1%          77,0%
Homeware                              17,4%           7,4%
Cosmetics                              1,1%           2,8%
Jewellery                              4,1%           4,0%
Cellphones                           (2,0%)           8,8%
Total                                 11,2%         100,0%

Product price inflation in TFG Africa averaged approximately 4,4% compared to
the same quarter in FY2022.

Cash retail turnover for the quarter, contributing 68,8% to TFG Africa’s retail
turnover, grew by 10,2% compared to the same quarter in FY2022. Credit retail
turnover was 13.4% up on the same quarter in FY2022 with acceptance rates down
3.7% to 21% due to the prevailing economic conditions.

Online retail turnover for the quarter grew by 11,4% compared to the same
quarter in FY2022 and now contributes 3,2% to total TFG Africa retail turnover
(Q1 FY2022: 3,1%).

Other income grew 18.7% to R757m over the period on the back of credit sales
growth and higher interest rates.

TFG Africa opened 74 new profitable outlets during the quarter and traded from 3
172 outlets at the end of the quarter.

TFG LONDON PERFORMANCE UPDATE

TFG London’s strong performance continued as employers encouraged their staff to
work more from the office and formal events resumed. Increased movement of
people and growing demand for our key categories have supported sales in the
region. Q1 FY2023 delivered retail turnover growth of 39,9% (GBP)compared to the
same quarter in the previous financial year.

The retail turnover growth was largely driven by own stores, which delivered
growth of 64.0% on Q1 2022 whilst gross margins held. Online retail turnover
from TFG London’s own sites grew 7,7% (GBP) in Q1 FY2023, while retail turnover
via third party online channels grew by 20,3% (GBP), both off a high base in the
prior year. Online retail turnover contributed 38,4%(GBP) (FY2022: 47,4%) to TFG
London’s total retail turnover for the quarter.

TFG AUSTRALIA PERFORMANCE UPDATE

TFG Australia continued to exceed expectation with retail turnover growth of
15,7% (AUD) in Q1 FY2023 off a very high base in FY2022. This performance was
supported by strong product demand, low unemployment rates and a robust economy.

Online retail turnover growth for the quarter normalised at 8,2% (AUD) compared
to the same quarter in FY2022, now contributing 6,5% (AUD) to total TFG
Australia retail turnover (Q1 FY2022: 7,0%).
TFG Australia opened 8 new outlets during the quarter while 3 outlets were
closed. At the end of the quarter, TFG Australia traded from 581 outlets.

GROUP PERFORMANCE UPDATE

Overall, the Group delivered a strong performance during the first quarter with
retail turnover growth of 16,3% compared to the same quarter in FY2022.

Online retail turnover performance continues to normalise with growth of 13,2%
for Q1 FY2023 compared to the same quarter in FY2022. The contribution of online
retail turnover to total retail turnover for the quarter was 9,7% (Q1 FY2022:
10,2%) as customers continue to return to physical stores and become less
dependent on online shopping.

UPDATE ON THE ACQUISITION OF TAPESTRY HOME BRANDS PROPRIETARY LIMITED –
FULFILMENT OF CONDITIONS PRECEDENT

Shareholders of TFG (“Shareholders”) are referred to the announcement released
by the Company on the JSE Stock Exchange News Service on 7 March 2022 advising
that the Company had entered into a sale and purchase agreement (“SPA”) to
acquire the entire issued share capital of Tapestry Home Brands Proprietary
Limited for a purchase consideration, subject to certain adjustments, of R2.35
billion (“Transaction”).

Shareholders are hereby notified that all conditions precedent to the
Transaction have either been fulfilled or waived as set out in the SPA, it being
noted that the approval from the relevant competition authorities was obtained.
Accordingly, the Transaction is now unconditional in accordance with the terms
of the SPA and is envisaged to be implemented with an effective date of 1 August
2022.

OUTLOOK

The Group continued to invest in its key strategic initiatives to further
strengthen its differentiated business model. It has made progress on its key
strategic objectives, especially that of growing the value segment contribution
further and its speciality brand business portfolio which remains very well
positioned for further organic and inorganic growth, supported by a strong Group
balance sheet.

In light of the current macroeconomic conditions, the ongoing rise in input
costs, rising interest rates and a weaker exchange rate, we expect the consumer
to remain under pressure. There will be a continued focus on further improving
gross profit margins during the second half, expense control, working capital
management and disciplined capital allocation whilst continuing to invest in
growth (growth mindset).

Trade since the end of the quarter has been encouraging across all trading
territories. For the first three weeks of the July 2022 trading month TFG Africa
had retail turnover growth of 27,3%, TFG London had growth of 5,3% (GBP) and TFG
Australia had growth of 72,8% (AUD).

Shareholders are advised that the financial information on which this trading
update is based has not been reviewed and reported on by the Company's external
auditors.

Cape Town
28 July 2022

Financial Advisor, Sponsor and Corporate Broker to TFG:
Rand Merchant Bank (A division of FirstRand Bank Limited)

Legal Advisor to TFG:
ENSafrica

Date: 28-07-2022 02:12:00
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