The Foschini Group Ltd.’s turnaround of South African discount clothing chain Jet is grabbing the attention of a larger rival as competition for the lower end of the market intensifies.
TFG, which acquired Jet three years ago, has refurbished the stores, revitalized the chain’s supply base and added its home-furnishing brand — Jet Home — to 78 of the almost 464 outlets across the country. Jet’s former owners Edcon Holdings Ltd. was teetering on bankruptcy and didn’t spend on expansion, said TFG Chief Executive Officer Anthony Thunström.
“It was starved for close to ten years, so they weren’t great shopping experiences,” Thunström said in an interview at the company’s head office in Cape Town’s industrial area of Parow. “There was almost no intact supply base. As people didn’t get paid, they stopped supplying.”
South Africa’s energy crisis and accelerating food inflation is prompting consumers to shop at discount stores. Rising demand may help the retailer more than double TFG’s revenue from the so-called value segment, which also include brands such as Exact, RFO and The Fix to 20 billion rand ($1 billion) in the next five years, according to Thunström.
The turnaround success caught the attention of Pieter Erasmus, chief executive officer of Pepkor Holdings Ltd., South Africa’s largest clothing retailer, who last month said he is watching Jet closely as better access to funds has helped it take market share.
Jet’s decline under the private equity-owned Edcon allowed Pepkor to grab a bigger share of the market. It also left room for newcomers such as Pick n Pay Stores Ltd.’s standalone clothing outlets. Even Shoprite Holdings Ltd., Africa’s largest grocer, has recently opened specialist clothing and baby stores.
TFG, which has been highly acquisitive in the last five years with purchases ranging from furniture and bedding makers to branded footwear, doesn’t need to open many more Jet stores at this stage, Thunström said.
Instead, it will continue to put time and money in modernizing Jet’s shop fronts — something the CEO said will cost about 250 million rand, compared with the more than 3 billion rand that was estimated around the time of purchase. TFG plans to revamp 65 more Jet stores this year.
“Where we’ve spent a little bit of money on revamping stores, the results have been almost instant,” he said.
--With assistance from Amogelang Mbatha.
