South Africa’s No.3 clothes retailer Foschini Group missed estimates with a 10% rise in full-year profit on Thursday, as faster growth in cash sales eclipsed more profitable credit sales.
Foschini, the biggest retailer of Adidas and Nike Inc products in Africa’s most advanced economy, has tightened its criteria for granting store credit cards due to debt write-offs that have hit both retailers and banks.
Foschini said headline earnings per share (EPS) rose to 898 cents in the year to the end of March, well below a 918 cent estimate by Thomson Reuters’ StarMine, which puts more weight on recent forecasts and those from historically accurate analysts.
Headline EPS is the main profit measure in South Africa that strips out certain one-off and non-trading items.
Share in Foschini slumped 7.63% to R166.17 at the close, one of their biggest daily percentage decline in nearly seven years.
Sales rose 13.6% to 16.1 billion rand ($1 billion) with cash sales, which were boosted by partly a loyalty programme, up 26.3% and credit turnover inching up 4.3%.
Retailers have been among the worst performing stocks over past two years as consumers rein on spending due high personal debt levels and rising fuel and energy costs.
In a bid to offset slowing growth home, South African retailers have set their sights on the rest of Africa, where sales growth is about three times the rate home.
But Foschini has said tapping into that growth is difficult due to a shortage of the sort of prime retail space companies like Foschini favour in lucrative markets such as Nigeria.
Foschini, which runs about 148 stores in the rest several other African countries such as Nigeria, plans to increase its store base in the rest of Africa to 375 by 2020.
The company recently agreed to pay 238 million pounds ($366 million) for upscale British apparel retailer, Phase Eight, in a deal that gives it access to European markets.