Recent financial results from Famous Brands and The Foschini Group (TFG) highlight the pitfalls of offshore expansion strategies amid a challenging South African economy. Both companies have seen significant share price declines, with management distractions contributing to underwhelming performance. Investors are questioning the focus on international growth over core domestic operations.
Famous Brands and The Foschini Group (TFG) have faced sharp declines in their share prices, underscoring the risks of diverting management attention to overseas ventures. Famous Brands has shed 20% of its value year-to-date, trading at around R55 per share, down from more than R165 in 2016. TFG is down 40% over the same period.
For Famous Brands, poor capital allocation has been a key issue, exemplified by the 2016 acquisition of UK-based Gourmet Burger Kitchen, which failed financially by 2020. The company remains burdened by underperforming segments. Its retail business reported a loss of R11.6-million on revenue of R171-million for the six months to August. Signature Brands, focusing on upmarket full-service restaurants, saw its operating margin worsen to -7.0% from -6.7% in the prior period. Wimpy UK closed five restaurants and opened two, yielding just R1-million in operating profit at a 2.2% margin.
Core areas show mixed results. In Leading Brands, quick-service restaurants recorded 2.6% like-for-like sales growth, with 53 new stores opened and 10 closed, but operating profit stayed flat at R238-million. The manufacturing business performed better, with revenue up 10.8% and operating profit rising 23.6%, improving margins from 9.3% to 10.4%.
TFG's challenges mirror these issues. At its August capital markets day, management targeted a 12.5% compound annual growth rate in sales for TFG Africa through 2028, but actual growth for the six months to September 2025 was only 5.3%. International operations faltered: Australian Ebit dropped 18.4%, while UK sales rose just 0.7% excluding the White Stuff acquisition. Finance costs doubled year-on-year due to debt from that deal. Overall, TFG flagged a 20% to 25% drop in headline earnings per share, prompting an 18% share price fall over five days, returning to December 2020 levels.
These results illustrate the difficulties of offshore expansion in a slow-growth South African market, where companies like Bidcorp and OUTsurance succeeded through steady, focused approaches.