JSE-listed retailer TFG, formerly known as The Foschini Group, said TFG Africa conservatively estimated to have lost about 360,000 trading hours in the 12 months to 31 March 2023 due to Eskom’s load shedding. However, as previously reported, the retailer estimates the actual impact to be more than double this figure (i.e. approximately 730,000 lost trading hours) as customer demand is significantly dampened by the associated disruption and inconvenience with reduced customer footfall before, during and immediately after load shedding periods.
“We estimate the financial impact of load shedding to have reduced TFG Africa’s retail turnover by in excess of R1,5 billion in full year 2023, with a concomitant impact on operating costs and inventory provisioning which ultimately impacts gross margins achieved,” the retailer informed investors on Friday.
The investment in alternative energy sources, including back-up batteries, has partially mitigated the impact of recent load shedding, although the units are less effective at increased frequency and extended hours experienced during stages 5 and 6.
As of 31 March 2023, 1 875 stores had back-up power, representing approximately 75% of TFG Africa’s retail sales. Plans are in place to equip the majority of our key shops with muchneeded emergency power in the coming months.
TFG said investments of R200 million have been made to date for alternative power solutions, which was not planned and increases the cost of doing business.
“The elevated levels of load shedding commenced in the middle of the festive trading season resulting in reduced available trading hours during a key trading period. This resulted in a moderate increase in inventory levels, as our proactive management of inventory in season mitigated some of this risk. Consequently, the comparable TFG Africa store units decreased by 10% on full year 2022,” said TFG.
“Additionally, due to provisions and markdown taken to clear the inventory, the gross margins decreased 220bps in the TFG Africa business for full year 2023 when compared to full year 2022.
“Additional unbudgeted diesel and security costs were also incurred to power and protect operations and stores impacted by load shedding.”