Woolworths vs. TFG

Things are calming down on SENS, thank goodness. I’m all for a strong flow of news, but I do wish things were more evenly spread out.

Today, I’ve focused on the retail dynamics at Woolworths and TFG. By now, you’ve seen the typical media headlines about the Food vs. Fashion pivot at Woolworths and the store closures at TFG. In this morning’s mailer, you’ll get a deeper understanding of what’s going on there.

On Monday, I’ll cover a few mining and industrial updates that came out this week, as well as the latest from Motus. There are also some financial services updates that need attention (like Discovery and Santam).

As usual on a Friday, the team from DealMakers brings you a mix of deal summaries and thought leadership pieces on topics ranging from ESOPs through to private credit. Get all of it here.

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Listen to it here and share it with someone who needs this message today.

You’ve seen the headlines: Woolworths (JSE: WHL) is focusing on Woolworths Food, as well as the B and H in FBH (Beauty and Home). After many attempts to rework their Fashion business, it seems as though they’ve decided to focus their efforts elsewhere. It’s not clear yet what this actually means for the Fashion business.

If they were expecting a round of applause from the market, they’ve been very disappointed. Instead of responding positively to this news, the share price has moved back towards the 52-week low:

Ouch.

I think there are essentially three problems here.

Woolworths Food, clearly the best business, is almost 70% of group adjusted EBIT. This means that Woolworths shareholders are staring down the turquoise barrel of a gun, with the core business competing directly against the Checkers banners within Shoprite.

And despite being a value-focused retailer, Shoprite’s incredible growth in volumes is powering a gross margin in Supermarkets RSA in excess of Woolworths Food. Just how premium is premium anyway?

To add to the risks, the other 30% of adjusted EBIT at Woolworths has tough questions to answer about its right to win in its chosen markets.

The net result? A tough task for Sam Ngumeni.

The good news is that he brings decades of internal experience to the role. It’s really good to see Woolworths going with a local executive this time around, as I think the South African retail market requires a deep understanding of local consumers.

Speaking of consumers, they are the real winners from such wild competition in this space. Just think about how much more convenient the grocery experience has become since the pre-COVID era.

The other retail headlines you’ve seen this week are related to store closures at The Foschini Group (JSE: TFG). This is another unfortunate example of a retailer with a share price that has been swirling in the toilet bowl:

A trading update for the 21 weeks to 22 August 2026 reveals group sales growth of just 0.2% as reported, or 2.0% in constant currency.

That’s an ugly outcome that has been dragged down by – you guessed it – TFG Australia!

Nothing pulls a retailer’s share price down under quite like Aussie exposure, with that business suffering a 4.7% decline in turnover in local currency. And things aren’t exactly great elsewhere - TFG Africa grew by 3.4% and TFG London was up 2.3% (in GBP).

The retailers have different reporting periods, so it’s not a perfect comparison by any means, but we can learn something by digging into the categories.

The strong growth in the beauty category at Woolworths (+7.9%) is echoed by TFG, with that category up by 12.5%. Do either of these retailers really have a moat there, or are they just riding a wave of demand that could subside at any time?

Woolworths seems to have a stronger story to tell in Home. Growth in that category was 11.7% vs. TFG achieving just 3.7% in the Homeware segment. Again, not perfect, but that gap is unlikely to be explained purely by timing differences.

It’s useful to keep in mind that Yuppiechef within Mr Price has been a consistent double-digit revenue growth performer. One has to be careful about drawing conclusions from only a few data points, but it feels to me like you need to go upmarket to really do well in homeware categories in South Africa.

Another data point that stood out for me is that TFG’s gross margin is described as being broadly in line with the prior period, despite the significant change in mix that comes from these growth rates:

At least the online business at TFG continues to shine, with TFG Africa online sales up by a spectacular 54.1%. Online now contributes 10.5% of total sales vs. 7.1% in the prior period.

I expect this contribution to keep growing strongly, particularly as TFG Africa closed a whopping 85 stores during the period and only opened 25 new stores. The group has flagged expected closures of 80 stores in FY27 and a further 100 stores in each of the following two financial years.

Keeping in mind that TFG Africa operates thousands of stores, this kind of discipline is not a bad thing.

But it will hurt retail landlords, particularly owners of marginal centres. If you look at the retail-focused REITs on the JSE, they list TFG as their biggest tenant. My hope is that by sticking to REITs with high-quality retail portfolios, I’ll avoid the impact of TFG’s store closures. Privately-held smaller centres probably won’t be so lucky.

A further point worth noting is that TFG Africa’s credit sales were down by 2.5%, despite acceptance rates for new accounts increasing by 40 basis points to 20.3%. Investors need to keep a close eye on a debtors book that grew by 4.5% despite a contraction in credit sales.

TFG London is a good example of a mature online market, with online sales growth of 3.3% vs. total sales growth of 2.3%. The contribution of online sales ticked up from 41.2% to 41.6%.

Very few additional details have been given about the Australian business at this time. The less said, the better I think.

The apparel game is really tough. Unlike Woolworths, TFG doesn’t have the luxury of saying that they will focus elsewhere. But at least TFG has an excellent online offering in South Africa that they can lean into in the form of Bash. Checkers has taught us how powerful a proper omnichannel strategy can be!

Do your own research and speak to your financial advisor. Nothing you read or listen to in Ghost Mail should be interpreted as financial advice. Every effort is made to avoid errors in Ghost Bites and related podcasts, but I am only human. Reading Ghost Bites isn’t a substitute for digging into the numbers and key details yourself.

US markets rallied strongly overnight after Fed Governor Waller signalled he leans toward holding interest rates this month.

The CME FedWatch tool now points to a 50% probability of a rate hike, with August's non-farm payrolls report due later today set to sharpen the picture.

Futures are flat in early trade, though Asian markets are mostly firmer, taking their cue from Wall Street's gains.

The dollar has softened as yields eased, while precious metal prices firmed considerably.

Oil is off yesterday's highs but remains elevated and on track for a strong weekly gain as the Middle Eastern war continues.

The rand has firmed on the softer dollar, and a positive open is expected for the JSE All Share Index, though caution is likely leading into this afternoon's US jobs data.

This update is provided by Shaun Murison, Senior Market Analyst at randswiss.com. Connect with him on LinkedIn here and follow him on X here.

Key Indicators: 

USD/ZAR R15.98/$ | US 10yr 4.76% | Gold $4,468/oz | Platinum $1,813/oz | Brent Crude $91.71