TFG has a portfolio of ~24 retail brands in South Africa, six of which have been acquired over the past three years through the purchase of Jet and Tapestry. We want to understand how the existing 18 brands have performed in recent years, so that we can better understand the ‘organic’ growth track record of the TFG South Africa division.
This research was inspired by the findings in Mirror, mirror, which analysed MRP’s lofty growth aspirations by unpacking consumer apparel spending by brand within income brackets. Two things were clear: the degree of fragmentation in the apparel market among higher-income earners (the largest market segment by value); and the importance of strong local brands to compete against the greater participation of foreign or global brands in this segment.
By better understanding TFG’s organic growth performance by brand, we believe analysts are better equipped to evaluate the retailers’ strategies and growth prospects.
To perform this analysis, we evaluated the spending of 22seven users by brand within four income brackets over the past five years. The charts below show the contribution of each brand to total 22seven user spending at all TFG’s existing brands over the period. The brands are organised in groupings that have similar scale.
A word on credit: Credit sales are important for TFG and account for c30% of annual sales. Fortunately, since Covid, most of TFG’s credit payments have shifted online, making it easier for us to distinguish credit payments from other purchases. That said, in-store account payments, EFTs and other credit idiosyncrasies do introduce a higher forecast error into such an analysis…
Still, based on the large samples of transactions for most brands, we believe the trends shown below are significant.
What you need to know
- @home has lost spending share within the TFG stable, without a corresponding adjustment to store numbers.
- TFG’s growth brands may need to grow ~20% pa for TFG Africa to achieve 5% store growth. Store numbers for many large brands appear to be saturated.
- Over the past five years, Archive, Sneaker Factory, The FIX, Exact, sportscene and Totalsports have gained share of total spending at TFG.
- There are signs of better store density for Foschini over the period.
Observations:
- Due South and Donna have closed their doors over the past two years. Donna has been absorbed into Foschini stores and Due South has shut down completely. In 2018, these brands together accounted for ~4.5% of user spending at TFG.
- Footwear brands Archive and Sneaker Factory have grown consistently in recent years, each increasing their contribution to total TFG spend by ~1%.
- Chart 2 highlights brands that are supported by different income segments. Note how higher-earning 22seven users spend more at Fabiani and G-Star Raw than lower-earning users – the green line is at the top and the red line is at the bottom in the first two panels. It’s the opposite for Exact and The FIX, where lower-earning users make up much more of total spend than higher-earning users.
- Fabiani’s share of user spending has increased modestly over the past five years. G-Star Raw, Exact and The FIX have performed even better – all increased their spending share.
- It’s interesting to compare TFG’s sports-focused brands, sportscene and Totalsports. Panels 1 and 2 in Chart 3 show how both have increased their share of total TFG spending. And, while both brands have a similar average share of spending, sportscene has a much higher dispersion from different income segments. Notably, lower-income users contribute more than higher-income uses. For Totalsports, each income segment accounts for a similar share of total spending, and the growth trends across income brackets are similar.
- Markham is a significant brand for TFG, but Chart 3 shows how its share of spending has trended lower over the last five years. This trend is consistent across income segments.
- Homeware brand @home is shown in Chart 4. It’s the brand that attracts the greatest share of spend, mostly from higher-income users. @home gained share in 2020 and 2021, but that share has since declined in each income segment in 2022. This likely reflects a normalisation of post-Covid nesting.
- According to our findings, Foschini is the largest standalone clothing brand in the TFG stable. Its share of total user spending has increased in the R25-70kpm income bracket.
- Of TFG’s two jewellery brands, users have allocated more of their total TFG spend over the last five years to the smaller Sterns brand than to larger American Swiss.
Now, to store numbers…
TFG has a long history of financial information that allows us to chart store numbers across brands. This information, used in conjunction with the 22seven spending analysis, provides a good picture of overall brand-building performance.
The following charts show TFG’s store numbers by brand in South Africa over the last 17 years. Again, we’ve separated them into four sections for ease of reference.
Observations:
- It’s very difficult for a brand to grow bigger than 350 stores in South Africa. Of TFG’s long-standing brands, only Markham achieved this – temporarily – in 2018.
- Chart 6 shows how store numbers for TFG’s largest brands increased rapidly in the decade leading up to 2018. Thereafter, store numbers for most brands declined and have since stabilised, with little growth in numbers in recent years.
- Totalsports and sportscene are the stand-out growth performers over the period. From ~100 stores 17 years ago, both brands had 310+ stores in 2022. sportscene’s growth seems likely to continue.
- Jet is big. With more than 400 stores, it has a much larger store base than any existing TFG brand. As we’ve suggested previously, the opportunity for TFG here is to drive sales density at existing Jet stores, rather than significantly expanding the brand’s store footprint.
- The mid-sized brands are shown in Chart 7. For most of them, store numbers peaked before 2020. Based on the trajectory of these brands over the last eight years, it’s likely that the opportunity for these brands in South Africa is saturated.
- TFG’s growth brands are featured in Chart 8. Sharp increases in store numbers for Relay Jeans and Sneaker Factory show management’s confidence in these brands becoming the future engines for growth. Other brands with increasing store numbers include RFO, Fabiani and @homelivingspace.
- Finally, Chart 8 is a reminder of brands from the past. 26 brands have traded under the TFG banner over the past decade (excluding Jet), and on our count there are six that are no longer trading today – a survival rate of 74%. Closures are to be expected, of course, but it’s a reminder that even seemingly established brands die. Due South reached 77 stores and Donna reached 100+ before failing. This information curbs our enthusiasm for the success of rapidly growing brands like Sneaker Factory and Relay Jeans…
What does this mean for future growth? If the brands in Chart 6 and Chart 7 are relatively mature and their growth prospects are limited (with the exception of sportscene) Insights estimates that the remaining ‘growth’ brands need to expand their store numbers by 19-23% pa, for the overall store base to increase by 5% pa.
What have we learned?
The following chart summarises both data sets: 22seven user spending data and TFG’s reported store numbers.
- In the top-right quadrant, it shows that growth in user spending at brands like sportscene and Sneaker Factory is consistent with growth in store numbers.
- In the lower left quadrant, the decline in user spending is consistent with the brands that have shut down over the period.
- Spending at Foschini has increased, while its store numbers have decreased, suggesting positive increases in store density (sales per store).
- Of concern, user spending at @home has decline substantially, while the store base (@home plus @homelivingspaces) has declined only modestly. This indicates a shift in spending that is not yet reflected in the reallocation of TFG’s real estate.
