Johannesburg - South African retailer The Foschini Group (TFG) expects its profit in the year to next March to be boosted by customers spending cash in stores as it tries to curb the impact of credit card defaults, its chief executive said on Monday.
The retailer has tightened its criteria for granting store credit cards due to debt write-offs that have hit both retailers and banks in Africa's most advanced economy.
TFG wrote off consumer debt worth more than 900 million rand in the fiscal year that ended in March 2014 - up nearly 40 percent from a year earlier.
TFG, the biggest seller of Adidas and Nike products in South Africa, increased the amount set aside to cover customer defaults by 35 percent to 816 million rand this fiscal year compared with last.
“We are keeping our credit taps very tight but our cash sales have been growing at around 20 percent and that's one of the reasons why we had earnings growth last year and why we expect to have earnings growth in the year to March 2015,” TFG's chief executive Doug Murray told reporters.
About 58 percent of TFG's 14.8 billion rand sales in the year to end-March was from store credit cards.
That contribution has been shrinking since then, Murray said.
TFG accepted around 40 percent of card applications in the twelve months that ended in March compared with an acceptance rate of about 55 percent in 2013.
It has also launched a reward programme to lure cash consumers into its stores.
Murray said his company would open five stores in Ghana by next March and was looking at entering Kenya, Mozambique and Angola as part of a four-year plan to more than double the number of its stores across Africa.
TFG already operates in several African countries that include Nigeria, Botswana, Zambia and Namibia.
Like other South African retailers, TFG is struggling with slack demand at home as shoppers battle higher fuel prices, unemployment and rising personal debt levels.
In response, South African retailers have been looking for new revenue streams in the rest of the poor but fast-growing continent - where sales growth for many of them is three times the growth rate at home.
“Africa is a long-term play, last year it gave us close to 26 percent sales growth,” Murray said.
“We've got to be there.”
The Cape Town-based company, which operates 17 retailer brands ranging from women's fashion to jewellery, operates 120 stores outside South Africa. - Reuters