Jin­gle swells

Fes­tive sea­son could be bet­ter than ex­pected for some

Finweek English Edition - - PORTFOLIOPUNTS COMPANIES&MARKETS - ANDILE MAKHOLWA andilem@fin­week.co.za

SOUTH AFRICA’S RE­TAIL­ERS may sur­prise the mar­kets on the up­side when they re­port on their fes­tive sea­son per­for­mances. There were fears of an­other sub­dued Christ­mas in 2010, mainly aris­ing due to in­con­sis­tent shop­ping trends in the lat­ter half of the year. How­ever, cur­rent mar­ket sen­ti­ments sug­gest the re­cent fes­tive sea­son won’t only con­firm con­sumers have re­cov­ered but will also in­di­cate the strength of the re­cov­ery. Re­tail­ers are still adding up their fig­ures but many are op­ti­mistic.

“We’d be very sur­prised if re­tail­ers don’t post bet­ter num­bers than they did over the pre­vi­ous two Christ­mas pe­ri­ods, given that in­ter­est rates have been cut (again) and GDP growth rates have been trend­ing up­wards since De­cem­ber 2009,” says Nino Frodema, a port­fo­lio man­ager at Metropoli­tan As­set Man­age­ment. He adds that if the rel­a­tively strong Novem­ber re­tail sales data is any­thing to go by “we’d ex­pect that mo­men­tum to fol­low through into De­cem­ber”.

Chris Gil­mour, a re­tail an­a­lyst at Absa As­set Man­age­ment Pri­vate Clients, says against all con­cerns of high house­hold in­debt­ed­ness and stag­nant em­ploy­ment, sales up­dates re­leased by re­tail­ers late last year raised hopes for bet­ter fes­tive trad­ing. “With all things equal, it’s rea­son­able to as­sume it was a much bet­ter fes­tive sea­son,” says Gil­mour. “All eco­nomic in­di­ca­tors are point­ing to an im­prove­ment. Yes, we’re still grap­pling with house­hold debts and un­em­ploy­ment. But most peo­ple are no longer wor­ried about los­ing their jobs. We’ve also had above-in­fla­tion wage in­creases, which must have helped con­sumers.”

That should sound en­cour­ag­ing to re­tail in­vestors. But the re­tail bas­ket on the whole is an as­sorted mix. Thus it would be naïve to ex­pect a whole­sale grand per­for­mance from all over the fes­tive sea­son. For ex­am­ple, while 2009 was gen­er­ally tough for the whole in­dus­try, there were re­tail­ers who punched above their weight. But oth­ers didn’t even smell the all-im­por­tant fes­tive sea­son trad­ing.

Frodema says play­ers in the semidurable dis­cre­tionary mar­ket (cloth­ing and footwear) would most likely be the “star” per­form­ers in re­tail sales sub-cat­e­gories over the Christ­mas pe­riod, with high sin­gle digit growth rates. Clothes gen­er­ally fea­ture promi­nently on con­sumers’ shop­ping lists for Christ­mas. “That means we can ex­pect good num­bers from ap­parel re­tail­ers Tru­worths, Mr Price and Fos­chini. In par­tic­u­lar, it would be in­ter­est­ing to see what Fos­chini would re­port af­ter its re­vamp­ing of its sup­ply chains. Its sales update in the lead up to the fes­tive sea­son was en­cour­ag­ing.” Un­listed Ed­con, which owns Edgars and Jet, has been re­port­edly los­ing mar­ket share to those re­tail­ers.

Fur­ni­ture re­tail­ers must also have im­proved on last year’s fig­ures. Gil­mour reck­ons JD Group’s chas­ing high value items – such as video and plasma TVs – must have boosted its top line dur­ing the pe­riod. JD, un­like its smaller ri­val Lewis, never had Christ­mas last year. But it’s on the road to re­cov­ery.

Food re­tail­ers are a lit­tle wor­ry­ing, de­spite be­ing de­fen­sive stocks. They’re trou­bled by ris­ing costs in an ex­tremely soft food in­fla­tion en­vi­ron­ment, which was the case through­out 2010. That makes it un­likely that gro­cers (per­haps ex­cept the Sho­prite group) would have seen dou­ble digit sales fig­ures over Christ­mas.

How­ever, health and beauty group Clicks will, in all like­li­hood, punch up with dou­ble digit fig­ures.

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