Tuesday, February 25, 2014

Seeking Alpha: Foschini Group Offers Short-Term Pain, But Maybe Some Long-Term Gain

South Africa definitely has issues right now. Unemployment runs close 24%, official inflation is over 5%, and economic issues have led to strikes, unrest, and violence in many parts of the country, not to mention weaker consumer and business confidence. Against that backdrop, it's not so surprising that The Foschini Group (OTCPK:FHNIY), one of the larger retailers in South Africa, is having a tougher time of it, with the ADRs down 40% over the past year and the South African shares down about half as much (down 21%).

There are definitely things that Foschini needs to work on, including comparatively unimpressive inventory turns and a high reliance on credit sales, but there are also some worthwhile positives in the company's favor. Foschini is positioned towards the higher end of South Africa's "mass-middle market" and has nearly 20% share in a market where the informal sector still has about 40% overall share. What's more, the company has already begun to expand outside of Africa and has been targeting logical growth opportunities. The Foschini Group does not look hugely undervalued to me today, but it does look like a good option for playing a relatively bullish thesis on the South African consumer, if your interests are in that direction.

Please read more here:
Foschini Group Offers Short-Term Pain, But Maybe Some Long-Term Gain

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