Above-average wage hikes keep Foschini tills ringing
South Africa's third-biggest listed clothing retailer, Foschini Group, reported a 19% rise in first-half profit due to a boost in consumer spending coming from above-average wage increases and historic-low borrowing costs.
Foschini, which runs 14 retail brands, said yesterday diluted headline earnings per share totalled 396.1c in the six months to end-September, compared with 333.3c a year earlier.
"For the first five weeks of the second half, retail turnover has continued at similar levels to the first half," Foschini said. It said sales increased 12.6% to R6.1-billion, helped in part by new stores and price increases. Same store sales grew 6.6%.
Although consumer spending is improving, analysts have warned that share prices for retailers may be over-valued, given what they can deliver. Shares in the company, which have gained more than 20% so far this year, were up 2.13% at R129.71 by 12.41pm, outperforming a 0.26% gain in the all share index. The share price rally this year, which mirrors similar or more gains for domestic retailers, has also been fuelled by expectations of healthy returns from Foschini's expansion into the rest of Africa.
The company runs 98 stores outside its home market in countries including Botswana, Nigeria and Zambia.
It plans to open a further 56 stores in countries where it already operates, and plans to enter Mozambique and Ghana in the next two years.