TFG Commences Section 189A Process for Head Office Retrenchments

• The Foschini Group (TFG) has initiated a formal consultation process under Section 189A of the Labour Relations Act, potentially leading to retrenchments among its South African head office staff.
• TFG states the process aims to reduce complexity and lower costs within its Head Office operating model, aligning with strategic objectives.
• The company has committed to a thorough consultation process, considering alternatives and prioritizing employment protection, but has not disclosed specific numbers of affected roles.
• This restructuring is partly linked to TFG Africa's "Project Vela" program and the integration challenges following its 2022 acquisition of Street Fever.
• The initiative comes amidst significant financial difficulties for TFG Africa, marked by expenses outpacing turnover growth and a substantial decline in profitability and share price.

This restructuring unfolds against a backdrop of significant financial pressure on TFG Africa.

The Foschini Group Limited (TFG), a prominent retail conglomerate overseeing approximately 40 brands across three distinct markets, has initiated a formal consultation process. This significant step, undertaken in accordance with Section 189A of the Labour Relations Act, signals a potential for retrenchments among its South African workforce. Employees were informed of this restructuring initiative last week, and the company has since confirmed that the process is actively underway.

While the precise scope remains under wraps, reports suggest that a number of roles within TFG's head office operations could be impacted. Crucially, this exercise is understood not to extend to the group's extensive store-level retail operations, though it remains unconfirmed whether any of its manufacturing facilities, spanning both clothing and furniture, will be affected. TFG has publicly stated that the review of its Head Office operating model is aimed at reducing operational complexity and achieving a structurally lower cost base, aligning with its broader strategic objectives.

Underpinning this corporate restructuring is the legal framework of Section 189A of the Labour Relations Act, which mandates a structured consultation process for large-scale retrenchments. TFG has affirmed its commitment to adhering strictly to this legal requirement, emphasizing that the current discussions represent proposals rather than final decisions. The company has pledged to follow due process, ensuring direct engagement with any employees whose positions may be affected. Furthermore, TFG has indicated that all alternatives raised during the TFG employee consultation process will be thoroughly and properly considered.

A core priority for the group, as articulated by its management, is the protection of employment wherever feasible, including exploring opportunities for redeployment into suitable roles across its diverse portfolio. Despite these assurances, TFG has refrained from providing specific details regarding the number of roles or particular functions that might ultimately be impacted by this TFG retrenchment process. However, its annual report had previously foreshadowed these "strategic actions," highlighting a focus on stringent capital expenditure and inventory control, aggressive reduction of structural operating expenses, and further cuts to corporate overheads as its "build phase" nears completion.

The current Foschini Group restructuring South Africa is partly driven by strategic initiatives within its TFG Africa retail division, specifically the "Project Vela" program. This ambitious undertaking aims to reorganize brands into distinct "operating stacks," a move designed to streamline organizational structures, eliminate unnecessary layers, and enhance overall agility. A key outcome of this program will be the integration of marginal brands into more efficient operating models. Furthermore, the Section 189A process is understood to be, in part, a consequence of TFG's 2022 acquisition of Street Fever.

This deal saw the integration of Street Fever's 114 stores with TFG's rapidly expanding Sneaker Factory outlets, leading to the absorption of approximately 650 jobs, of which roughly 50 were traditional head office positions. The delay of over three years in addressing potential duplications arising from this acquisition has drawn scrutiny. TFG's extensive "Sports and Lifestyle" brand portfolio, which includes prominent names like Sportscene and Totalsports, alongside licensed JD Sports stores and the niche Archive brand, has seen Sneaker Factory specifically acquired to penetrate the value segment of the market.

This restructuring unfolds against a backdrop of significant financial pressure on TFG Africa. In the last financial year, ending March 31, the division experienced a retail turnover growth of 5%, which was outpaced by a 7.5% increase in trading and other expenses. This disparity resulted in a decline in gross margin from 42.6% to 41.6% and a notable drop in its earnings before interest and taxes (EBIT) margin from 11.7% to 7.1%. The market has reacted sharply to these challenges; TFG's share price has fallen by 35% year-to-date and more than halved, dropping 51%, over the past year. Since a capital markets day in August 2025, and particularly following a profit warning in October, the company has seen 54% of its market value erode.

This case provides a live example for labour lawyers and compliance officers on the practical application and challenges of Section 189A of the Labour Relations Act during large-scale corporate restructuring, particularly concerning head office roles and post-acquisition integration. It underscores the need for robust consultation processes and careful management of employee relations during cost-cutting initiatives.

Source: Original reporting via Moneyweb