The Foschini Group (JSE: TFG) navigated a tumultuous phase in 2022, enduring a staggering 18% share price drop, but 2023 has brought a flicker of recovery, marking a 5.27% gain year-to-date.
In a challenging consumer landscape rife with high-interest rates and inflation, TFG struggled to maintain its profitability despite achieving record sales in the first half, soaring to a remarkable R28.4 billion in group revenue, a 12.9% surge. The resilience showcased in TFG Africa’s retail turnover, escalating by 17.3%, and a notable 23.9% increase in online retail turnover, contributing nearly a tenth to the group’s retail arm.
However, despite these impressive figures, earnings per share dwindled by 15%, landing at 393.6 cents, compared to 464.6 cents the previous year. The strain on TFG Africa’s gross margins, declining by 2.5 percentage points to 39.5%, was compounded by approximately 287,000 lost trading hours due to load shedding, further impacting margins through inventory clearance.
Amidst these challenges, the macroeconomic landscape hints at a potential shift with a slowdown in inflation and global central banks contemplating a pause in rate hikes. This potential easing in monetary restrictions could signal a turning point for TFG’s future performance.
Technical
The Foschini Group’s share price embarked on a notable revival in 2023 following a tumultuous 2022 marked by a severe downtrend. This resurgence defied the previous negative momentum as the price soared beyond the confines of a descending channel pattern and the 100-day moving average, heralding an upward shift.
However, a recent downturn led to a corrective move within this upward trajectory, finding support at R92.56 per share, reigniting the push for an upward trend. Yet, the climb faced resistance at R119.13 per share, triggering an overbought condition measured by the Relative Strength Index (RSI) before a subsequent selloff.
Currently, the price retraced toward the crucial 61.80% Fibonacci Retracement Golden Ratio, coinciding with the 100-day moving average. If this level holds as a sturdy support, a potential reversal might retest the R119.13 mark, contingent upon buyer support for upward movement. Conversely, a forceful breakdown under this pivotal point on significant trading volume could imply heightened selling pressure. This price action suggests a delicate balance between bullish and bearish forces, with the R92.56 level serving as a crucial barrier against further downward pressures.
Summary
The Foschini Group’s resilience amidst economic headwinds is evident in its recovery despite earnings per share decline and margin challenges. Technical indicators signal a potential turnaround after a turbulent 2022, showcasing a balance between upward momentum and resistance levels.
Sources: The Foschini Group, Reuters, TradingView
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