TFG Identifies Online Gambling as Greater Economic Threat Than Shein Competition

Online Gambling Surges to R150 Billion Market

Data from Statistics South Africa shows the total online betting market has grown from R10 billion to R150 billion over the past five years. This growth trajectory has positioned South Africa’s online gambling market as one of the highest ratios relative to GDP globally.

Online gambling now represents 1.6% of total household spending in South Africa, compared to 5% for clothing and footwear. More than one in four adults in the country gamble monthly, directly impacting disposable income available for retail categories including TFG’s core segments of clothing, apparel, and homeware.

The retailer indicated that even Shein appears affected by this trend, evidenced by changes in the platform’s average basket size over the past 18 months.

TFG Holds Ground Against Shein in Key Segment

While acknowledging Shein as a "massive global powerhouse," Thunström presented data showing the Chinese retailer’s growth has slowed following the application of level playing field rules. Import and customs duties levied on smaller value parcels from November 2024 have contributed to a 30% decline in Shein’s average basket size from its April 2023 peak.

“The 30% decline is a really significant number and it indicates that they’re not running away with market share, even though they continue to absorb overall consumer spend,” Thunström said.

Despite this decline, Shein’s average transaction value of approximately R1,000 remains structurally higher than TFG, Truworths, and H&M, which cluster around R600.

TFG reported strong growth in womenswear, traditionally Shein’s strongest category. The segment achieved turnover growth of 7.5% and gross profit growth of 8.1% during the six-month period, outperforming overall Africa business growth of 5.3% and gross profit increase of 3.1%.

Financial Performance Under Pressure

The interim results revealed significant challenges for the retailer, with earnings down 21% for the six-month period. TFG Africa recorded EBITDA decline of 9.7% with top-line growth of 5.3%, which the group maintains aligns with the 5.2% market growth reported by the Retailers’ Liaison Committee.

The financial update has weighed heavily on investor sentiment. TFG’s October 21 trading update, which forecast headline earnings per share decline of 20% to 25%, marked the first profit warning of the year and triggered a sharp market reaction.

Between October 20 and November 7, the stock declined 30%, erasing R12.1 billion in market capitalization. From the start of 2025, TFG shares have fallen approximately 50%, representing R27.5 billion in lost market value. Shares rebounded 2% on Monday following the detailed results release.

Net debt increased R3.3 billion to R10.1 billion in the six-month period, with R1 billion attributed to the acquisition of UK retailer White Stuff. Without this acquisition, sales growth at TFG London would have been flat. The group maintains R1.5 billion in excess debt, with another R1.1 billion absorbed by working capital ahead of peak trading.

The net debt to EBITDA ratio stands at 1.55 times, which TFG expects to normalize by year-end due to seasonality.

Strategic Response and Market Outlook

TFG has responded to valuation concerns with R456 million spent on share buybacks before September’s end, followed by an additional R500 million in late October.

The retailer announced plans to accelerate optimization of trading space, including trimming store sizes where appropriate, and implement decisive cost rationalization measures. Inventory commitments will be reviewed in light of current trading trends.

The proportion of excess inventory—stock held for over 27 weeks—reached 19%, the highest level in three years. The company plans to address this through Black Friday promotions.

The next six months represent a critical period for full-year performance, with retailers facing comparison against the elevated 2024 base created by two-pot retirement withdrawals that stimulated the economy.

TFG operates 39 retail brands across clothing, homeware, and furniture categories in Africa, the United Kingdom, and Australia.

Source: Moneyweb