The Foschini Group Limited’s (TFG) share price struggles continue, with the stock on course for its fourth consecutive week of decline. Year-to-date, the share price has depreciated over 10%. However, there is a silver lining, as the company boasts a positive 52-week performance with a gain exceeding 4.6%.
On a brighter note, TFG signed a significant franchise agreement with JD Sports Fashion plc, becoming the exclusive retail partner for JD Sports in South Africa. This collaboration brings a new, compelling international sports fashion offering to the South African market, potentially bolstering TFG’s existing sports retail presence. The first stores are expected to launch by year-end, with an aggressive rollout plan targeting over 40 stores within the next five years.
Despite the positive developments, the company’s recent financial performance seems to be weighing on investor sentiment. TFG’s ROE currently sits at 12%, which is similar to the industry average. However, the company’s five-year net income growth average of 2.1% falls short, potentially contributing to the lack of investor excitement.
Technical Analysis
The daily chart paints a bearish picture for TFG’s immediate price action. The share price currently trades below all three key moving averages [50-SMA (blue line), 100-SMA (orange line), and 200-SMA (red line)], highlighting a downtrend.
With the RSI (33.64) trading comfortably below the 50.00 level, a sustained push lower might bring the 9,217 cents into focus in the near term. A sustained break below the significant level on significant volume would leave 8,556 cents and the major support at 8,100 cents firmly within the bears’ reach in the coming sessions.
However, renewed buying pressure could find significant resistance at the 200-SMA, with a break above likely to bring the 10,840 cents into play. A successful break above the 10,840 cents could confirm the bullish momentum and would leave the 11,396 cents and the major resistance at 11,913 cents as the next levels of significance higher.
Summary
The Foschini Group Limited’s share price faces headwinds in the short term. The lacklustre financial performance and current valuation metrics are cause for concern. Technically, the bearish trend remains dominant, with a potential decline towards 8,100 cents on the cards if support levels are breached. However, a break above the 200-SMA could signal a reversal, with initial resistance at 10,840 cents and major resistance at 11,913 cents.
Sources: TradingView, Simply Wall Street, MarketWatch, Business Live.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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