Retailers make top 40
RETAIL stocks are once again making their presence felt on the JSE, having gained substantially on the momentum created by Cyril Ramaphosa’s ascent to the presidency.
Truworths International, TFG and Spar will, along with Imperial, be included in the JSE’s top 40 index later in March, replacing Steinhoff International, Intu, Resilient and Fortress.
The three retailers will join Woolworths, Mr Price and Shoprite in the coveted index, which is closely tracked by institutional investors and other market watchers.
Retailers have been some of the biggest gainers since November, when the market began to price in the expected positive political changes.
The upshot of these shares’ higher prices is that as the economy improves, so will their earnings.
TFG’s share price has jumped 60% on the JSE since November, Truworths 36% and Spar 32%.
Prior to the improvement in sentiment, local retailers in general had a rough time, stretching back several years, as weak economic growth shrunk consumers’ disposable income.
As the operating environment toughened, some players expanded their businesses offshore in an attempt to diversify their revenue streams.
Woolworths is one notable example, through its acquisition of Australian retailer David Jones, though the deal later proved to be costlier than initially envisaged.
Gryphon Asset Management portfolio manager Casparus Treurnicht said consumer disposable income would improve in line with economic prospects in the country.
The Treasury expects the economy to grow by 1.4% this year and to gradually improve in the period thereafter.
The optimism is based on improved business and consumer confidence translating into fixed investment and job creation, leading to higher consumer spending.
With the inflation profile looking relatively benign, the Reserve Bank could resume its interest rate cutting cycle as early as March, with a decision on rates tentatively expected on March 28.