The Foschini Group is an investment holding company with subsidiaries retailing clothing, jewellery, cosmetics, accessories, homeware, furniture, cellphones and sporting and outdoor apparel in South Africa, greater southern Africa and abroad through a portfolio of 22 retail brands.

The group has over 3 100 stores, including chains such as Foschini, Markham, Exact, @home, American Swiss, Sterns, Totalsports, sportscene, and Duesouth. The group’s most significant markets are South Africa, Namibia and the United Kingdom.

Foschini Group shares are for sale on the Johannesburg Stock Exchange (JSE). Foschini Group shares have had a long history on the bourse, having been listed since 1941.

The Foschini Group employs over 22 000 people and has a JSE market cap of R28 billion, with revenue for 2016 coming in at R23 billion. Foschini Group share price has enjoyed solid growth since listing.

The Foschini Group aims to buy into all LSM target markets, from value-oriented to higher-end consumers. More than 57% of turnover is generated from cash sales, with the balance coming from credit customers. The group further generates revenue through customer value-added products mainly sold through its call centre, whilst cost savings are achieved through in-house design and manufacturing facilities. Seven brands also allow customers to buy goods through the group’s e-commerce channel. Whilst 77% of turnover comes from South Africa, geographical diversification is receiving increasing importance, with 13.7% of revenue coming from international outlets and 5% coming from the Rest of Africa.

Despite a challenging economic climate, the group registered solid financial data for 2016, above management’s expectations. Turnover was up by 31% to R21.1 billion, and cash sales grew by 18.4% from African operations. Headline earnings per share (excluding the purchase price of once-off acquisitions) rose by 17.6% to 1 055.8 cents. Over the past five years, shareholders have enjoyed compounded annual HEPS growth of 14.5% and steadily increasing dividends.

Growth activities for the group included the opening of 209 new stores in Africa, and successful moves to buy UK fashion brand Whistles (which owns 121 outlets) and franchise rights for Colette and Next. Net profit for the year increased from R1.897 billion to R2.157 billion. Going forward, strategies for the group’s growth include store expansion in existing and new territories, roll-out of online shopping offerings, targeted cash and credit rewards offers and diversifying product offerings across abroad range of merchandise categories.

Part of the business is now in foreign currency, serving as a natural hedge against the continued Rand volatility.

Foschini Group shares are becoming an increasingly attractive buy as the company diversifies both in terms of product offerings and geographical spread. At R131.85 by November 2016, the live online JSE stocks chart shows that Foschini Group share price is well below the high of R200 it achieved in 2015, but the forecast is that integration of new acquisitions should make the stocks a good buy.

Consumer Discretionary

Retailing

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