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Retail resilience shows in updates

| Economic factors

Trading updates from Woolworths, Shoprite and Massmart on Wednesday met a mixed reception from shareholders who had pinned their hopes on the resilience of SA’s biggest retail chains, despite job losses and power outages.

Woolworths jumped 6.5% to an intraday high of R100.93, while Shoprite fell 2.7% to an intraday low of R167.31.

Statistics SA’s retail trade data for May, also released on Wednesday, showed in real terms a 2.4% increase in sales year on year, with a particularly strong contribution from hardware stores and specialised food and beverage retailers.

Woolworths, which will release its financial report on August 27, said it grew comparable food sales by 6.6% in the 52 weeks to June 28 and comparable clothing sales by 4%.

Shoprite said it grew like- for -like turnover by 4.3% in the year to June.

Woolworths, who acquired Australian department store chain David Jones with effect from August 1, said total group sales including David Jones rose 54.9% and, excluding the acquisition, by 12%. Its food division grew sales by 13.5% while prices rose 7.7% and retail space, including stores in Africa outside SA, expanded by 10% net of closures and excluding franchise conversions.

Woolworths’ clothing sales in SA rose 9.6% while total retail space grew 7.1%. Sales of general merchandise rose 7.7% and by 5.6% in comparable stores.

It said sales by David Jones for its full year, including concession stores, rose 6.4% in Australian dollar terms and were up 3.7% in comparable stores.

Meryl Pick, retail analyst at Old Mutual Equities, said Woolworths’ trading update was ahead of most analysts’ expectations, in particular David Jones’s performance.

David Jones grew sales 2% in the first six months of the financial year and by 6% for the year as a whole. That means second-half sales accelerated by 8%.

Woolworths said the impairment rate on its financial services debtors’ book rose to 5.4% from 4.8%. The book has grown 10.5% in the past year.

Shoprite, which will report on its financial results on August 19, said total turnover rose 11.2% to about R113.7bn against last year. In the local supermarkets, sales rose 10.5%, a strong performance in prevailing economic conditions and reflecting market share gains, it said.

The 189 supermarkets outside SA increased sales 13.5% in rand terms and 15.5% in constant currency terms. Sales growth was limited by the sale of the Tanzanian business and temporary closure of the Palanca store in Angola after a fire.

Shoprite said its furniture division grew turnover 13% despite a competitive market. Other operating segments achieved growth of 13.8%.

Cassie Treurnicht, fund manager at Gryphon Asset Management, said Shoprite’s share price drop showed market expectations were higher and there was disappointment about slower sales in the second half of the financial year.

It has taken three or four years for the broader economic slowdown to be reflected in Shoprite’s performance but it looked as though Woolworths’ higher-income customers were showing more resilience in the current economic climate than Shoprite’s core market, Mr Treurnicht said.

Shares in Massmart Holdings gained 0.33% to R147.49 after it said comparable sales for the 26 weeks to June 28 rose 6.8% compared with the same period last year.

The Massbuild and Masswarehouse chains performed particularly strongly.

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