TFG has shed more than a third of its value this year.
To be fair, that’s partly because this stock, like most other South African retailers, came into 2025 with red-hot exuberance around South African and US election results. Then along came tariffs and a realisation that it will take more than a few new faces in the government to fix many years of anaemic growth in South Africa, leading to a nasty sell-off in the sector.
The better approach is therefore to view the stock on a 12-month basis, with the share price down 15%. But perhaps the worst statistic of all is that the share price is trading at the same levels we saw in 2012. Lost decade, you say? Yes. Clearly.
When there is low economic growth, retailers need to fight over how the pie is cut, rather than over a slice of a growing pie. It’s not a zero-sum game on a nominal basis because of the impact of inflation, but it’s not exciting on a real basis either. This is why so many local retailers went off to look for greener pastures in faraway lands such as the UK and Australia. With few, if any, exceptions, we should rather stick to sending rugby teams to those places than retail management teams.
The South African market may be incredibly tough, but at least the operating conditions here are well understood. Australia has destroyed value for shareholders in the sector, with the UK not far behind.
So here we are, with TFG having come through the lost decade and then the pandemic, with the only real boost coming from the online and omnichannel shopping opportunity — one that the group has responded to strongly with Bash. Apart from that, it’s been pretty uninspiring stuff, as evidenced by the latest trading statement for the 13 weeks to June 28 2025.
Turnover growth in South Africa was 5.2%, which means there is very little to hang your hat on when viewed through an inflation-adjusted lens. It’s still much better than TFG London, where sales fell by 2.6% in local currency if you reverse out the acquisition of White Stuff. TFG Australia is even worse, with sales down 2.8% in local currency. It’s not hard to see why the market has been dumping this stock.
In an effort to stem the bleeding, the company hosted a capital markets day during which management put out some very spicy targets. Despite barely running ahead of inflation in TFG Africa, the plan is to grow turnover at a three-year compound annual growth rate (CAGR) of 12.9% — more than double the current rate! This will be supported by a store rollout plan to grow the footprint (measured by number of stores) at a CAGR of almost 6% over that period.
If we make a simplifying assumption that the rollout will carry a similar mix of stores to the current footprint, it suggests that more than half the growth will need to come from like-for-like sales.
If the market believed these targets, the share price would’ve changed direction. Sadly, it didn’t. If anything, it accelerated its slide in the aftermath of these numbers being put to the market, as they are just so far removed from the reality of the current performance.
The market must also be concerned about the commitment to the offshore businesses, despite the clear evidence that things aren’t going well. In the Australian business, TFG pitches its offering as a mix of value and mid-market. In South Africa, its footprint touches practically every LSM, but the group sees value as the growth engine. Yet in TFG London, there’s a champagne bar as part of the customer experience at the upmarket offerings, whereas White Stuff, the new acquisition, is neither value nor fashion focused, but somewhere in the middle.
To be spread across multiple geographies without any indication of a coherent theme or strategy (beyond just selling stuff that isn’t food) isn’t going to appeal to investors any time soon.
After such closely correlated share prices this year despite vastly different underlying performances, the decoupling of Mr Price and TFG has happened — in the past month, Mr Price is up 2.2% and TFG is down 15%. And in case you’re wondering, Truworths is down 1% in the past month and Pepkor is down 2%.
The market is looking for consistent execution, not seemingly impossible targets.
The writer recently went long Mr Price
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