Foschini profit dented as consumers cut spending
THE Foschini Group, South Africa’s third-biggest listed clothing retailer, missed estimates with an 11% rise in full-year profit as debt-laden consumers cut back on spending.
Foschini, which also sells jewellery and furniture, said diluted headline earnings per share totalled 851.3c in the year ended March compared with 766.1c a year earlier.
The result fell short of the 859c estimated by Thomson Reuters StarMine, which gives more weight to forecasts from historically accurate analysts.
Sales rose 11% to R12.8bn.
After more than two years as investors’ darlings, South African retailers are falling out of favour as doubts creep in about the health of debt-fuelled consumer spending and views that share prices have been pushed to unjustifiably high levels.
South African industry-wide retail sales slowed 2.8% year on year in March from 3.9% in February, official data showed.
Foschini, which sells the bulk of its products on credit, said net bad debt as a percentage of its debtors’ book increased to 10.5% from 9.4% the previous year.
Due to high levels of consumer indebtedness, enhanced credit risk management practices had been implemented, the company said
The company said it planned to open 150 new stores this year.
“In line with our strategy of investing for long-term growth, we will continue to open new stores in certain of our formats. We anticipate opening in excess of 150 new stores in the year ahead which will increase trading space by approximately 6%. We believe the group is well positioned to once again produce solid results in the year ahead, although caution is warranted given the state of the consumer environment,” it said.
However, the group said economic conditions in South Africa would remain difficult with the credit environment likely to deteriorate further.