A major international retailer is preparing for a significant overhaul of its store network after warning that dozens of locations will close and hundreds more are under review.
The company’s latest results show a business facing growing profitability challenges despite continued revenue growth. Its performance reflects broader pressures across the apparel industry, where rising operating costs and softer discretionary spending have weighed on margins even as sales remain resilient.
Consumer shopping habits continue to evolve as online channels capture a larger share of retail spending. At the same time, shoppers remain selective with discretionary purchases, prompting many established brands to reassess their store networks while investing more heavily in e-commerce and omnichannel capabilities.
Founded in 1924, The Foschini Group (TFG) is a South Africa-based multinational retail company that owns 39 brands spanning apparel, footwear, jewelry, beauty, technology, and home goods.
TFG identifies hundreds of underperforming stores
TFG revealed plans to close at least 100 stores over the next fiscal year while reviewing approximately 300 underperforming locations across its portfolio.
However, the company stressed that permanent closures remain a last resort.
“Closing stores is absolutely the last resort after you’ve tried everything else,” said TFG CEO Anthony Thunström in an interview with the Sunday Times. “We look to see whether one of our other brands would perhaps trade better in that store, in that location.”
The retailer operates more than 4,900 outlets across 23 countries, with business segments across Africa, London, and Australia.
Rather than immediately shutting down locations, TFG is pursuing several initiatives to improve profitability. These include optimizing store space, reducing inventory purchases, and leveraging physical locations to support online fulfillment.
“Given the impact of a poor economy on store profitability and the extent of our online penetration, we are closing underperforming and marginal stores and sharpening our brand portfolio,” said Thunström in the company’s latest earnings call.
The retailer also plans to convert portions of select stores into fulfillment hubs for online orders as digital sales continue to grow. Management expects tighter inventory controls and improved product mix decisions to help support higher gross margins in the coming year.
The company said trading conditions weakened significantly during the second half of the year as softer consumer demand during the peak shopping season and lower margins weighed on results across all operating regions.
Gross margin declined by 120 basis points to 48.2% as the retailer increased markdown activity to clear inventory. At the same time, operating expenses rose 10.7%, outpacing ​sales growth and placing additional pressure on earnings.
One bright spot was e-commerce. Online sales surged 31.7% during fiscal 2026 and now account for 14.8% of total retail sales, with scale efficiencies helping improve digital profitability.
Store count data also highlights TFG’s increasingly cautious approach to expansion. The company ended the fiscal year with 4,914 stores as of March 31, 2026, compared with 4,923 a year earlier. During that period, the retailer opened 233 locations but closed 242, resulting in a net reduction of nine stores.
The store review comes as retailers worldwide seek to improve profitability by focusing investments on their most productive locations. Across the industry, companies have increasingly prioritized e-commerce fulfillment, supply chain efficiency, customer data capabilities, and omnichannel services as online sales continue to represent a growing share of consumer spending.
Management expects consumer conditions to remain challenging for the foreseeable future.
“We are planning on the basis that consumer conditions will remain under pressure for some time across each of our territories and may potentially deteriorate further until a durable solution is found to the Iran war, inflation cools, and consumer sentiment improves,” said Thunström during the earnings call.
TFG plans to close at least 100 stores while reviewing approximately 300 underperforming locations across its portfolio.Shutterstock
The shift toward e-commerce continues to reshape retail
TFG’s approach shows how retailers are adapting to a marketplace where digital and physical channels increasingly work together
As consumers embrace online shopping more than ever, retailers are reassessing how many physical stores they need and how those locations fit into broader omnichannel strategies that combine digital convenience with in-store experiences.
Global e-commerce revenue surpassed $6 trillion in 2024 and is projected to reach $10 trillion by 2033, according to Capital One Shopping.
Despite that growth, physical stores remain the dominant sales channel. Worldwide online sales accounted for approximately 19.9% of total retail sales in 2024, indicating that the majority of purchases still occur in person.
For retailers like TFG, the challenge is finding the right balance between maintaining a profitable store network and investing heavily in digital capabilities that consumers increasingly expect.
“We are enhancing our fintech and credit capabilities with their structurally higher operating margins and returns, we are reducing the complexity of our operating model, and in so doing, structurally lowering our cost of doing business,” said Thunström in the company’s latest earnings call.
As e-commerce adoption continues to rise globally, retailers that successfully integrate digital innovation, supply chain efficiency, and customer convenience are likely to be better positioned to navigate a rapidly changing and increasingly competitive retail landscape.
