Massmart/Shoprite sales updates cheer investors

After a disappointing sales update from fashion retailer Truworths, investors “took some comfort” from Massmart and Shoprite’s updates, says 36One Asset Management analyst, Jean Pierre Verster.

“The Massmart numbers were slightly above expectation and the Shoprite numbers also came in roughly in line with expectations,” he said. “Truworths’ numbers (on Tuesday) set people up to be cautious going into these releases.”

The first listed retailer to report festive season-inclusive figures, Truworths posted a 5.2 percent rise in sales to R6.2 billion for its 26 weeks to December 28, with same-store sales slightly down year-on-year.

Massmart said on Wednesday its sales for the 52 weeks to December 28 were 10.4 percent higher at R78.2 billion, buoyed by its building materials and home improvement unit. Same-store sales rose 7.5 percent.

For its six months to December, Shoprite’s turnover grew 12.5 percent to R57.5 billion, with same-store sales up 5.1 percent.

Read also:Here’s how investors have reacted to Shoprite’s imminent exit from Nigeria

Data released by statistics SA showed SA’s retail trade sales came in better than expected in November, increasing 2.6 percent year on year.

John Loos, FNB’s household and property sector strategist, said the bank expected “a better year for retailers” this year, with real retail sales growth expected to accelerate to 3.4 percent from about 2.4 percent last year.

This was due to the sharp decline in oil prices over the past six months, he said, “and a lesser decline in global food prices, which are expected to see to it that retail and consumer price inflation decline — translating into stronger real household disposable income growth.”

But Verster said he expected the oil price slump to benefit consumers in the US more than those in SA, where various moving parts would counteract the relief to consumers.

Barclays said in a note the apparent “resilience” in recent retail sales reports seemed to have raised hope that household consumption could now be on a major rebound. “However, we would caution that the retail sales data are inherently volatile.”

Barclays expected the fall in fuel prices to provide “spending support” of about R21 billion to consumers this year. But credit growth to households remained limited while unemployment weighed on income growth.

“Any rebound in household consumption spending in 2015 will be modest,” it said.