Foschini’s shares leap on sales
SHARES in The Foschini Group (TFG) leapt by more than 5 percent yesterday after the retail company released a better-than-expected trading update.
Retailer TFG cashed in on sales during the festive period, boosted by its recent acquisitions in the UK.
The company’s overall sales went up 14.6 percent for the period from November 26 to December 26.
The group said yesterday that it had achieved a 47.9 percent increase in sales in the UK, while growth for the company’s Africa operations saw an increase of 11.5 percent in the same period.
The clothing and homewear retailer expanded in developed markets as a weak economy, tighter credit rules and tough competition hampered growth in its home market.
The company has made two key British acquisitions in recent years. In 2015 the firm acquired UK-based retailer Phase Eight for £140 million (R2.3 billion). Last year the group added another UK retailer, Whistles, to its stable for an undisclosed amount. South African retailers have increasingly looked to the UK and Europe to reduce their reliance on the fluctuating rand.
Foschini’s rivals Woolworths and Truworths have also made similar forays into European markets.
Ian Cruickshanks, the chief economist at the SA Institute of Race Relations, said the UK market provided South African retailers with revenue growth.
“While Foschini’s international sales are up, what is clear is that the improvement in its international sales was due to improvement in the rand exchange rate against sterling, it has surely enhanced the sales picture,” Cruickshanks said.
Foschini’s merchandise categories all saw growth in sales for the period. The group’s Africa clothing operations increased by 12.8 percent while its homewares arm recorded an increase in sales of 10.4 percent and its cosmetics department’s sales rose 5.4 percent.
The group’s cellphone arm saw an increase of 15.8 percent. Its cash sales for the period rose by 17.7 percent while its credit sales grew 5.2 percent.
A similar picture carries through to the group’s sales for the nine months to the December period. TFG’s trading update is more upbeat than those of its South African competitors, who are struggling to grow sales in an economy forecast to have expanded by less than 1 percent last year.
TFG shares rose 5.29 percent to close at R168.50 yesterday.
STOCKS gained for a fifth consecutive session yesterday, reaching a four-month high as bullion producers advanced on global uncertainty and retailers rallied on a better-than-expected sales update.
The benchmark JSE Top40 index climbed 0.58 percent to 46 333.08 points, while the broader all share index was up 0.69 percent at 53 158.54 points, its best since September last year.
Retailers gained sharply after The Foschini Group (TFG) posted a 14.6 percent jump in Christmas sales, better than the firm had expected.
Shares in TFG, which sells clothing and homeware, rose to a 20-month high of R170.90, but pared gains to 5.29 percent at R168.50.
The positive sentiment spilled over to TFG’s competitors, with Truworths International gaining 4.33 percent to R85.56 and Woolworths Holdings advancing 4.83 percent to close at R71.79.
The JSE’s general retail index is still down 16 percent since August and investors believe the sector offers value, according to Cratos Capital equities trader, Greg Davies.
“The market is anticipating the next six months will be a little better,” said Davies.
Bullion producers were also in demand as the gold price climbed to a seven-week peak on buying fuelled by political uncertainty after comments by the US President-elect Donald Trump on Nato and China.
Gold Fields led the bullion pack, gaining 4.54 percent to R47.46.
Stock trading was below par with 212 million shares changing hands, according to preliminary bourse data, compared to the last year’s daily average of 296 million.
Meanwhile, investors sold stocks globally yesterday, seeking shelter in gold as uncertainty over Britain’s departure from the EU and the policies of Trump curbed appetite for risky assets.