The expected lowering of South Africa’s interest rates and a stronger rand later this year could provide additional support for clothing and apparel retailers such as Mr Price, the Foschini Group (TFG), and Pepkor, among others.
While their grocery retail counterparts have largely been struggling to raise earnings owing to a tough trading environment, clothing retailers appear to be resilient.
Analysts yesterday said this was due to the diverse and value propositions the clothing retailers offer.
Further support will be provided by the expected lowering in interest rates and a potentially stronger rand later this year, analysts said yesterday.
“The Foschini Group results were good, as was the last Mr Price update and decent Pepkor Holdings results boosted by fintech,” market analyst Simon Brown said in an interview yesterday.
“I think there is life here in Mr Price, especially if we start seeing local rate cuts in the third quarter.”
Shares in Mr Price have risen 18.3% in the past six months although yesterday it traded 1.69% lower at R181.10.
In the three months to the end of December, Mr Price “achieved gross margin gains in each of its trading segments and in eight” of its nine trading divisions.
Its retail sales grew 9.9% to R13.2 billion, with South African sales firming up by 9.3% to R12.3bn at a time the group was buoyant about prospects for 2024.
“The first half of the year (2024) is anticipated to remain challenging for consumers, although this could improve in the second half if inflation continues to moderate and interest rates start retracting,” said Mr Price in an earlier trading update.
Another clothing retailer, TFG on Friday soared by 11% on the JSE although yesterday the momentum had slowed after it traded 1.37% stronger at R104.92 in afternoon trade.
Although TFG stock was down 5.8% in the past six months, its share price was 7.5% firmer in the past seven days.
Analysts believe the company’s stronger performance in its latest trading period will provide carry through support ahead of a potential lowering in interest rates by the SA Reserve Bank later this year.
“TFG navigated a challenging environment and delivered solid financial performance. The company is well-positioned for future growth with a strong balance sheet and strategic initiatives,” said market analyst, Marco Olevano.
Truworths, whose stock on the JSE was 46.6% higher in the past 12 months, slid by 1.12% in afternoon trade yesterday to R79.16 per share.
Truworths lifted sales by 3.8% for the first seven weeks of 2024 relative to the corresponding period of the 2023 financial period.
However, account sales for the period moderated by 0.6% while cash sales firmed by 8.2%.
In its recent trading update earlier this year, Truworths said retail sales for its Africa operations “were impacted by poor economic conditions and high interest rates leading to reduced disposable income”, and declining consumer confidence.
“The South African credit landscape remains under pressure due to high interest rates, pressure on consumers’ disposable income and the weak macroeconomic environment,” it said.
Pepkor – the owner of PEP, Ackermans, Shoe City, Refinery, Bradlows, Incredible Connection, among others – has also been on a sound footing although its stock was 1.82% weaker in afternoon trade on the JSE yesterday to trade R17.22 per share.
The company’s stock was weaker in the past six months despite stronger revenue generation, which firmed by 9.5% to R43.3bn in the six months to the end of March.
The company has also seen its fintech revenue elevate by a massive 24.5% to R5.8bn, boding well for its future prospects.
BUSINESS REPORT