TFG – Department store decay

Despite already having impaired its UK business there is still a considerable amount of goodwill attributable to TFG London, which could be at risk of further write-down, in our view. TFG London has historically had a strong reliance on department stores. However, two of its three department stores, which accounted for 77% of its UK concessions, failed. We think there is some risk in Jet targeting higher GPMs. The value gap to higher-priced aspirational products could reduce and weaken its value proposition. In our view, the online trends were exaggerated during lockdowns, and there are signs of reversion in online sales contributions. Online sales’ GPM could be lower than traditional retail, and as it cannibalises stores sales, there will have to be commensurate cost cuts in the traditional business.