Textile turmoil worries Foschini

Johannesburg - While Foschini manufactures 70% of its products locally, CEO Doug Murray said long lead times still pose a problem for the group's supply chain.

"We prefer our products to be manufactured locally, but there is turmoil in the local manufacturing industry," said Murray.

The industry relies massively on imported fabrics. This, Murray said, increases lead-times and comes with costly import duties.

Old Mutual Investment Group analyst Jeanine van Zyl said: "Getting the right stock is important so you don't end up writing off half of it." She said Foschini has had success in reducing the number of write-offs, increasing store space (with a 13.9% increase in trading area compared to 2008) and turning the Foschini brand around.

Murray said Foschini continuously tries to improve on the product offering. "We want to reduce lead times and have the latest fashions timely," he said.

"This economic cycle does not favour credit retail; our internal divisions are not in good shape," said Murray. On Thursday the company released its financial results for the year to end-March 2009, reflecting a 5.5% rise in turnover to R8.1bn and a 12.3% increase in its debtors' book to R2.7bn.

He said the company was happy about its results, considering the economic climate. Net bad debts, as a percentage of its debtors' book, increased from 8.3% to 8.7%.

"We have a very healthy debtor's book as we have been granting credit for years and we're seeing a very small deterioration in bad debts."

Of concern to Murray are the risks that come from the external environment. "GDP (gross domestic product) figures are quite shocking, and we're worried about job losses that will affect consumers," he said.

"We are expecting retrenchments across the country, but interest rates will add a bit of ammunition to the mortgaged person seeing more relief."

- Fin24.com