TFG CEO on the decision to buy Jet Stores from Edcon

The Foschini Group (TFG) has made a bold move by putting in an offer to acquire 371 Jet Stores from Edcon in a deal worth R480 million. This decision comes in the wake of Edcon filing for voluntary business rescue in April, as it grappled with a distressed balance sheet. The acquisition of Jet Stores marks a significant development for TFG, as it seeks to expand its retail footprint in a challenging economic environment exacerbated by the COVID-19 pandemic. In a recent interview with CNBC Africa, Anthony Thunström, Group Chief Executive Officer of TFG, shed light on the decision-making process behind the acquisition and provided insights into the future prospects of the deal. Thunström revealed that TFG had previously conducted an in-depth due diligence on Edcon group, including Edgars and Jet, four and a half years ago. However, back then, the deal did not materialize due to various factors such as the high asking price of around 10 billion rand and the complexity of integrating the businesses. Thunström emphasized that the recent opportunity to acquire Jet Stores on a standalone basis presented a more attractive proposition for TFG. The credit book of Jet Stores now aligns with TFG's risk appetite, and the systems have been prepared for separation, making the transition onto TFG's systems relatively seamless. Moreover, the reduced asking price for Jet Stores made it a compelling investment for TFG. When questioned about the negotiation process and whether TFG secured a good deal, Thunström highlighted the commercial and public interest aspects of the transaction. As part of the deal, TFG will be taking over lease liabilities for approximately 370 stores, with the potential to increase the store count to over 400 through lease negotiations. This move aims to preserve jobs and uphold contractual obligations, underlining TFG's commitment to responsible business practices. On the topic of foot traffic in stores, Thunström acknowledged the challenges faced by retail establishments, particularly in South Africa. He noted a notable decline in foot traffic, especially in super regional shopping centers heavily reliant on tourism and rural visitors. Despite these obstacles, Thunström remains optimistic about the future prospects of TFG and the retail sector, emphasizing the need for resilience and adaptability in the face of evolving market dynamics. Overall, the acquisition of Jet Stores signifies a strategic move by TFG to strengthen its position in the retail industry and capitalize on growth opportunities. With a focus on operational efficiency, employee retention, and customer engagement, TFG aims to navigate the current economic uncertainties and emerge stronger in the post-pandemic landscape.