Foschini share price rallies off strong results

Key takeaways

1. Record Revenue Growth: The Foschini Group Limited (TFG) reported record revenue of R60.1 billion for the year ended 31 March 2024, marking an 8.9% increase from the previous year.
2. Surge in Online and Cash Retail Sales: Online retail turnover soared by 22.0% to R5.6 billion, supported by strong performance on the Bash platform in South Africa.
3. Effective Inventory and Cost Management: TFG's effective inventory management and cost control led to a 9.9% increase in operating profit before finance costs, reaching R5.9 billion.
4. Strategic Store Expansion: TFG opened 272 new stores and closed 203, ending the year with a total of 4,766 stores across 23 countries.
5. Confident Outlook and Strategic Initiatives: Despite challenging macroeconomic conditions, TFG remains optimistic about capturing additional market share.

Strong Revenue Growth and Retail Performance

The Foschini Group Limited (TFG) reported firm financial results for the year ended 31 March 2024, with a record revenue of R60.1 billion, up 8.9% from the previous year. Retail turnover increased by 8.6% to R56.2 billion, driven by TFG Africa's impressive 10.4% growth across major merchandise categories. Notably, online retail turnover jumped by 22.0%, reaching R5.6 billion, significantly boosted by strong performance on the Bash platform in South Africa. Cash retail turnover also saw substantial growth of 9.9%, contributing 82.3% to the total retail turnover. The group's gross profit rose by 8.6% to a record R27.0 billion, with TFG Africa recovering its gross margin to 41.1% in the second half of the year.

Effective Inventory Management and Cost Control

TFG demonstrated effective inventory management and cost control, leading to a 9.9% increase in operating profit before finance costs to R5.9 billion. Cash generated from operations surged by 76.5% to R12.5 billion, which was used to fund growth, acquisitions, dividends, and repay debt. The group's net debt declined by 31.3% to R4.9 billion, reflecting improved working capital. TFG opened 272 new stores and closed 203, ending the year with a total of 4,766 stores across 23 countries. This strategic expansion and careful cost management enabled the group to declare a final dividend of 200 cents per share, marking a 33.3% increase from the previous year.

Outlook and Strategic Initiatives

Despite the challenging macroeconomic conditions, TFG remains confident in its ability to grow and capture additional market share. The group's robust balance sheet and diversified business model position it well for future growth. Key strategic initiatives include the completion of the Riverfields Distribution Centre, which will consolidate apparel retail brand operations and mitigate risks. TFG continues to seek high-quality acquisitions and strategic adjacencies to strengthen its business. The group's cautious yet optimistic outlook reflects its commitment to navigating economic challenges and leveraging opportunities for sustained growth.

Foschini -technical view

The share price of Foschini has produced a bullish price reversal from range support. The price reversal is supported by a move out of oversold territory.

The reversal suggests a move towards range resistance at 10780. Traders who are long might consider using a close below the 9580 level as a stop loss indication.