Foschini expanding as its shares climb
THE FOSCHINI Group (TFG) shares spiked nearly 3 percent on the JSE yesterday after the clothing retailer posted a 9.2 percent hike in turnover to R12.5 billion for the six months to end September despite slugging trading in the general retail sector.
TFG, which has a footprint in more than 32 countries, said it opened 144 stores during the period and was planning 100 more by next year as it embarks on a massive expansion plan. The group, however, said after tax profits remained flat at R1.04bn.
Chief executive Doug Murray said TFG believed that it could benefit from festive season despite sluggish trading in the general retail sector as consumers cut back on spending.
Murray said TFG would continue to focus on optimising its working capital management and capital in the period ahead.
“Despite the political and economic uncertainty, we believe that continued commitment to our strategic objectives around growth, profit, customer and leadership development will support our efforts to achieve a reasonable result for the full year,” Murray said.
An EY analysis last week showed that South Africa’s largest retailers were on a firm footing in the first half of the year, with retail profits up 4.9 percent in absolute terms compared to a 2.9 percent contraction recorded in the last six months of last year.
Some of the positive retail metrics noted by EY include a growing appetite to roll out more new stores and falling product inflation – supported by a stronger currency and a turnaround in food production after the drought-hit South Africa.
On the negative side, EY said that some of the challenges facing the sector were declining ROE and continued margin squeeze. TFG operates in three geographic regions of Africa; Australia and London.
The group successfully raised R2.5bn through an accelerated bookbuild during the period to fund the acquisition of Australian chain Retail Apparel Group (RAG).
TFG said its cash turnover grew 11.1 percent. It said it grew the cash turnover 3.8 percent percent in rand denomination, 4.1 percent in British pound with the balance coming from Australia.
The group said that its turnover growth in TFG Africa was low due to the challenging trading environment as well as the high base of 19 percent growth in the prior corresponding period.
In the period under review, the total cash over contributed 62.5 percent to total group turnover compared to the 61.4 percent in the comparable period. It declared an interim dividend of R3.25, slightly higher than the comparative period’s R3.20.
Murray said total retail turnover growth for the first five weeks of the second half year was at similar levels to the first half and that festive season trading will largely determine performance for the full year.
TFG shares rose 2.81 percent on the JSE yesterday to close R142.70.