CEO Doug Murray said yesterday, 28 March 2009, that while the economic cycle was hard for the group, it did not want to “sit back and wait for the upturn in the economy”, and was continuing to open new stores strategically.
Foschini said it would continue to open new stores in formats that are under-represented. It expects to open 120 stores this year, to grow trading space by about 11%.
The company opened 85 stores in the second half, taking total store openings to 154 for the year. Eight stores were closed. By year-end the group had 1539 stores, with an increase in trading area of 13.9% from the previous year.
Foschini said yesterday that the first half to March had resulted in turnover growth of 2.9% and a reduction in headline earnings of 2.7%, but the second half saw a significant improvement with turnover growth of 7.8% and an increase in headline earnings of 6.1%.
For the year as a whole, retail turnover rose 5.5% to R8,1bn and gross margins improved 0.4%, mostly due to lower markdowns after the festive season, when trading was better than expected.
Although total same-store turnover for the first half decreased 2.5%, the second half produced growth of 3%, resulting in flat same-store turnover for the year. Product inflation was about 8% and cash sales as a percentage of total sales grew from 36.4% to 38.2%.
The group's operating margin increased from 24.8% to 25% and a final dividend of 170c per share has been declared. Diluted headline earnings per share increased 2.8% to 553c, while headline earnings per share increased 2.3% to 559.5c.
Murray said the improved trading seen in the second half had continued and, although it was not possible to see a clear pattern as a result of the many public holidays in April, it looked good.
Foschini, the largest brand in the group, was starting to see the benefits of its turnaround strategy and sales were improving, he said.
But Foschini warned that the economy faced risks that could affect its business, the biggest being job losses, said Murray. He said the group had not yet seen the effect of job losses on its sales or debtors' book but costs and inventory management would remain focus areas.
Its supply chain initiative, begun a year ago, is aimed at lower lead times, and should increase stock turnover and enable Foschini to be first to market with key products.
Net bad debts as a percentage of its closing debtors' book rose slightly, to 8.7% from 8.3%. Foschini said it had taken a cautious approach to new accounts before the new credit laws were introduced.
Foschini started offering customers a 12-month account option, which about 90% of new customers have chosen. That should have a positive effect on both interest revenue and retail revenue.
Source: Business Day
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