The Foschini Group Limited (JSE: TFG) recently showcased a sharp downturn in its share price, with a 6.5% dip over the past week. A trio of days echoed this decline, painting the charts in shades of red, each session marking over a 2% descent. Yet, this narrative is far from concluded. The company gears up for a pivotal moment—unveiling its latest interim results on Friday, a juncture that may shape its future trajectory. In the company’s previous full-year report, a tale of growth unfolded: a 19.4% surge in turnover to R51.8Bn, a 4.1% rise in earnings per share, and a robust 18% expansion in gross profit, scaling to R24.8Bn. This saga stirred a near 3% upturn in the share price.
However, it’s essential to acknowledge that these achievements were not without their challenges. The company faced headwinds from various quarters, including the repercussions of the Ukraine conflict, escalating inflation, and higher interest rates, which impacted consumers’ ability to meet their financial obligations. South Africa’s power woes, often manifesting as load shedding, also cast a shadow alongside a global economy that showed signs of slowing.
As we venture into the first half of this year, many of these challenges are expected to persist and influence the company’s operating performance. Consequently, the upcoming release of their interim earnings results takes on added significance. Investors are eagerly anticipating these results as they seek insights into how the company navigated these formidable headwinds during the past two quarters and whether they can continue realizing growth in this tumultuous environment. It’s a pivotal moment that could reveal the company’s resilience and strategies for the road ahead.
Technical
On the 1D chart, a symmetrical triangle experienced a breakout that led to five consecutive days of share price appreciation. However, after meeting resistance at R111.43, the retracement commenced, now teasing the Fibonacci midpoint at R101.63. With the multiple SMAs trading quite close together on a neutral 14-day RSI, the momentum seems to hang in the balance, setting the stage for the earnings reveal.
If the earnings disappoint, the Fibonacci midpoint support may fail to contain the selling pressure, bringing the 61.8% Fibonacci golden ratio into play at R99.34 as the first potential hurdle to the downside momentum. This level is backed by the 25-SMA (green line), with the 50-SMA (blue line) and 200-SMA (orange line) not far below. It also acts as the breakout level of the former triangle, which could cumulatively build a strong support level. However, on a high-volume bearish run, a breakdown of this level could tilt the momentum firmly in the bearish favour, bringing support at R96.22 into focus before the psychological demand zone at R92.46 could halt the momentum.
Conversely, a positive earnings surprise could trigger an inflow of buying momentum to reverse the recent red candles. In this case, a pivot off R101.63 is possible toward resistance at R106.16. While the price has previously shown signs of resistance at this level, a breakout could result in a retest of the prior peak at R109.14 and R111.43 as the days progress.
Summary
After a strong presence of sellers enforced significant declines in The Foschini Group’s share price over the last three days, its interim earnings report on Friday could tip the scale. With the medium-term momentum seemingly neutral, it is all to play for as an exciting week comes to a close.
Sources: Koyfin, Tradingview, The Foschini Group Limited
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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