Foschini to expand African presence

OVER the next two years, the Foschini group will expand its African presence, adding 56 stores in the countries including Mozambique and Ghana, the company said on Thursday after releasing its interim results for the six months ended September.

Africa presents a compelling investment case for retailers — the rise in urbanisation and disposable income has seen a growing demand for modern goods.

The Economist Intelligence Unit predicts that by 2030‚ the Africa’s top 18 cities could have a combined spending power of $1.3trn.

Foschini currently trades out of 98 stores outside of South Africa, with 62 in Namibia, 16 in Botswana, 12 in Zambia, 2 in Lesotho, 4 in Swaziland and 2 in Nigeria.

The retailer believes that expansion into the rest of Africa is a longer term growth strategy and by the 2015 financial year, CEO Doug Murray said. Foschini will be trading out of in excess of 150 stores in Africa with expected turnover of more than R1bn.

The group, which besides flagship retail chain Foschini operates American Swiss and Totalsports, reported an 18.8% gain in diluted headline earnings per share to 396.1 cents for the six months to end September.

Retail turnover was up 12.6% to R6.1bn and an interim dividend of R2.36 was declared, up by 24.2%.

Jeanine Womersley‚ an investment analyst at Renaissance Capital, said the group’s earnings came in weaker than expected, largely driven by a softer than expected top-line performance, and the absence of any gross profit margin gain.

“Sales growth of 12.6% fell short of our initial forecast of 14.2%, driven by both softer like-for-like sales growth, and a slightly lower-than-anticipated contribution from new space growth. We believe management was disappointed with the group’s interim performance, specifically that of ladieswear. The group marked down goods too early when initial winter sales proved slow, only to subsequently be short of stock when weather conditions turned,” she said.

Mr Murray said: “Supply chain has been our focus for several years and the big driver is the reduction in lead times from ordering through to getting the goods into stores. Sometimes we hit some speed bumps with our supply chain and we’ve done that in the ladieswear this past interim period, but we know we’re doing the right things and we will persevere. We intend to keep trying to do more of our products in shorter lead times.”

Looking ahead, Mr Murray said retail turnover for the first five weeks of the second half had continued at similar levels to the first half and despite the challenging economic environment, the outlook remained good.

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