By Sue Mitchell for Australian Financial Review
South African retailer Woolworths may be ruing the day it outlaid $2.1 billion for David Jones, but its biggest competitor The Foschini Group (TFG) is eyeing further expansion in Australia after buying menswear retailer Retail Apparel Group for $302-million two years ago.
TFG is looking at “double-digit topline growth” this year at RAG, which owns Tarocash, Yd, Connor and Johnny Big, and plans to expand its American Swiss jewellery chain after testing the market by opening five bricks and mortar stores and an online store, TFG chief executive Anthony Thunstrom told journalists on Thursday.
While David Jones’ profits have halved since the Woolworths takeover in 2014, RAG has gone from strength to strength as rivals such as Ed Harry and Roger David have closed.
According to TFG results for the year ending March, TFG Australia’s topline sales rose 14.5 per cent to $494 million, same-store sales rose 7.8 per cent, online sales jumped 55 per cent and underlying earnings before interest, tax depreciation and amortisation were up 28 per cent at $57.3 million.
TFG Australia opened 36 new stores, lifting its store portfolio to 483.
Why is TFG thriving while Woolworths has been forced to write down the value of David Jones by $1.1 billion in 20 months?
“We find businesses with strong local management – and we don’t change management afterwards,” Mr Thunstrom said. “We also have incentives in place for management to stay on.”
RAG is run by retail veteran Gary Novis, who joined the company in 2007 after careers with Woolworths South Africa, David Jones and Specialty Fashion Group.
“Australia has not been in a recession since 1990 – it is almost the polar opposite to South Africa with unemployment also at record lows,” Mr Thunstrom said.
“Retail is not by any means easy there with the high costs around rentals and other operational costs, so there is little margin for error to get it right or wrong.”
TFG owns 22 retail brands including Fabiani, Markham, DueSouth, Charles and Keith, Colette and Next, and has more than 4000 stores in 32 countries, including the UK, where it owns fashion brands Phase Eight, Whistles and Hobbs.