BUSINESS MAVERICK: INVESTING: Retail bounces up – but don’t get excited

While Clicks has advised an 18% rise in its results, retail prosopects in SA are not rosy. (Photo: supplied)

Despite a recent bounce in retail share prices, South Africa’s economic fundamentals do not bode well for a recovery in the sector.

Amid a sea of red, Clicks’ share price surged by 13% this week after the pharmacy retailer advised the market that its results could rise by as much as 18%, better than its previous set of (good) results and ahead of market expectations.

Happily, other retailers seemed to follow suit, with rival Dis-Chem rising 5.4%, though most of Dis-Chem’s gains have reversed.

Unfortunately for those looking for green shoots, Clicks and to some extent Dis-Chem are considered outliers rather than front runners in the retail space.

“Yes, Clicks’ numbers are phenomenal,” says Kayalethu Nodada, an analyst with Old Mutual Investment Group.

“They have performed well over time and keep pumping out double-digit growth, but I was surprised by how much the price responded.”

The fact that the rest of the sector also appeared to bounce upwards means little.

“There are no signs of a protracted recovery and we cannot confidently say we have seen the bottom,” he says.

Source: Business Maverick analysis

In fact, if the numbers are anything to go by, life is likely to get more difficult, not better for retailers.

The latest data emphasise the fact that SA’s economy requires urgent intervention, which will not make Finance Minister Tito Mboweni happy as he prepares to deliver his Medium-Term Budget Policy Statement (MTBPS) later this month.

The BankservAfrica Economic Transaction Index (BETI), which details bank transfers and provides an indication of business activity, declined by 1.6% between September and August. This was the largest quarterly decline since June 2018, according to Shergeran Naidoo, head of stakeholder engagements:

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