South Africa energy crisis likely to hit TFG Africa sales by $55 mln

China Cultural Tourism and Agriculture

13/03/2023 10:49

JOHANNESBURG, March 13 (Reuters) - South African fashion
retailer TFG  TFGJ.J  said on Monday the country's rolling power
outages are likely to have reduced the annual retail turnover of
its African business by about 1 billion rand ($55 million).
    State electricity utility Eskom is implementing the worst
rolling blackouts on record, leaving households in the dark for
up to 10 hours a day.
    While TFG has backup power in 70% of its South African
stores, it lost about 345,000 trading hours in the 11 months
ended Feb. 28, it said.
    "The true impact, however, has been estimated at close to
double this figure as customer demand is dampened by the
associated disruption and inconvenience with reduced footfall
observed before, during and immediately after load shedding
(blackout) periods," the retailer added.
    This has in turn reduced retail turnover growth for the 48
weeks ended Feb. 25 to 11.4%. This excludes sales from recent
acquisitions, it said.
    Retailers must also decide whether to pass on the costs of
back-up energy to consumers or take a hit to their margins by
absorbing them.
    Additional unbudgeted direct costs of about 65 million rand
have been incurred in respect of diesel, security and
maintenance, while capital expenditure of about 220 million rand
has been spent to date on back-up power solutions, TFG said.
    For the year ended March, an additional 30 million rand will
be spent to ensure that 80% of TFG Africa's stores have backup
power over the next few months, it added.
    TFG, which also sells upmarket homeware, said the resulting
higher levels of inventory have also necessitated increased
levels of stock provisioning, which would contribute to the
"deterioration" of TFG Africa's gross margin compared to the
previous financial year.

($1 = 18.1779 rand)

 (Reporting by Nqobile Dludla; Editing by Kirsten Donovan)
 ((nqobile.dludla@thomsonreuters.com; +27103461066;))