Foschini Expands Outside South Africa to Boost Retail Growth
Bloomberg Business Week - Nov 19th 2012, 09:33
Foschini Ltd., a South African clothing and household goods retailer with nearly 2,000 stores, said it plans to open its first stores in Mozambique and Ghana as it accelerates an expansion drive outside its home market.
Foschini operated 1,920 stores at the end of September, of which 62 were in Namibia, 16 in Botswana, 12 in Zambia, two in Lesotho, four in Swaziland and two in Nigeria. It intends to open another 56 stores in those countries over the next two years to boost growth.
“Expansion into the rest of Africa is a longer-term growth strategy,” the Cape Town-based company said in an e-mailed statement earlier this month.
“By the 2015 financial year, the Foschini Group will be trading out of in excess of 150 stores in Africa” with expected sales of more than 1 billion rand ($114.9 million).
Foschini is following the example of other South African retailers such as Shoprite Holdings Ltd. (SHP) and Massmart Holdings Ltd. (MSM) in expanding across Africa to tap rising consumer spending.
Nigeria, Africa’s most populous nation, offers the greatest opportunity for expansion, said Ronnie Steyn, Foschini’s chief financial officer.
“Nigeria has up to 100 shopping centres in the planning stage,” he said by phone from Cape Town. “We have got 15 brands. We can have 400 stores there quite comfortably.”
Foschini’s net income rose 19 percent to 834.7 million rand, or 3.96 rand a share, in the six months through September, from 699 million rand, or 3.33 rand, a year earlier, the retailer said earlier this month
in a stock exchange filing. Sales rose 14 percent to 7.7 billion rand, with stores outside South Africa generating about 670 million rand.
Steyn attributed the increased profit to Foschini winning more customers, cutting costs and improving its buying.
The shares rose 2.65 rand, or 2.1 percent, to 129.66 rand at 3:37 p.m. in Johannesburg, giving the company a market value of 31.2 billion rand.
Truworths International Ltd. (TRU), another South African clothing retailer, earlier this month, revenue for the 18 weeks through Nov. 4 rose 16 percent to 3.3 billion rand. Sales at stores open for at least a year, rose 10.7 percent while prices increased by an average 3 percent, the Cape Town-based retailer said in a stock exchange filing.
Truworths shares rose 2.11 rand, or 2.1 percent, to 98.98 rand in Johannesburg, giving it a market value of 45.7 billion rand.
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