Shares of The Foschini Group Ltd. fell the most since September 2001 after the South African retailer included costs from a purchase that weighed on earnings and bad debts deteriorated.
The stock of Cape Town-based Foschini slid as the purchase of Phase Eight, a U.K. clothing chain, increased finance charges, while soured loans as a percentage of total store credit granted to customers increased to 13.6 percent in the 12 months through March from 12.4 percent a year earlier, the company said in a statement on Thursday.
Net income dropped 0.1 percent to 1.86 billion rand ($153 million), Foschini said. Once-off acquisition costs related to the purchase in January of an 85 percent stake in Phase Eight, which offers a range of evening wear, bridalwear and accessories aimed at the 35- to 55-year-old woman, amounted to 292 million rand.
South African retailers have been struggling to grow without acquisitions as high inflation and unemployment of more than 25 percent in their home market hurts spending. Local retailers including The Spar Group Ltd., Woolworths Holdings Ltd. and Steinhoff International Holdings Ltd. have expanded abroad in the past 18 months. South African investment company Brait SE earlier this month agreed to buy U.K. women’s clothing retailer New Look.
Foschini’s stock dropped 7.6 percent 166.17 rand by the close in Johannesburg, the lowest since March 2. The securities have gained 25 percent this year.
The purchase of Phase Eight lifted sales, which gained 13.6 percent to 16.1 billion rand, Foschini said.