Retail review 2025: ‘It just wasn’t the year for retailers’

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JIMMY MOYAHA: As the year draws to a close, we continue to reflect on the various sectors that make up our Johannesburg Stock Exchange (JSE) and the companies in those various sectors.

We’re going to look at the performances of the retail stocks for the 2025 financial year. Some retailers have had a torrid time, losing more than 50% of their share price. Others have had a slightly better time, even going out and expanding into new horizons.

For more on this I’m joined on the line by the founder of Just One Lap and a good friend of ours, Simon Brown, to take a look at the performance of retail stocks throughout the year and what we can make of it. Simon, thanks so much for taking the time. Always lovely catching up.

You and I have spoken about retailers throughout the year, and I’m sitting here looking at the performances of some of the biggest retailers over the 2025 cycle. Some of our clothing retailers are down double-digits, some more than 50%. Clearly this wasn’t the year for retailers.

SIMON BROWN: Evening, Jimmy. It absolutely wasn’t. And if we step back, 2024 was a huge year for retail. Mr Price was up almost 100% last year. The story was that we started to get rate cuts; that started in September. We’ve now had 1.5% in cuts from the Reserve Bank. Inflation was coming down. We also had the two-pot money withdrawals, which started again in September.

And there was just a sense that it was still going to be tough being a South African consumer, but a lot less tough.

I think what happened – well, we now know what happened in hindsight – is that we all got ahead of ourselves and we priced that into the market for last year.

Then this year came and it was tough. Yes, we got lower inflation. Yes, we got the two-pot money coming into the system, and yes, we got the interest rate cuts – a whole 1.5%. But we priced it into the system and I think we started the year just too optimistic for retailers. And I am guilty as charged on that. Absolutely.

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I got in last year. I saw the rally happening, I thoroughly enjoyed it, but then I thought we were going to eke out some more upside this year – and boy, we did not.

This was not a space in which you wanted to be invested. There were a few exceptions, weirdly mostly in the motor vehicle space. This was not a sector you wanted to be invested in at all. You were getting better returns pretty much anywhere else on the JSE.

JIMMY MOYAHA: Simon, you touched on the consumer pressure and we saw that filter through in the Sens announcements from the retailers as they gave us updates on their performances, each of the companies in their respective fields, regardless of where they are – but predominantly in the retail space. We also then flagged the consumer-pressure concerns and how that would affect their businesses.

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Let’s take a look at that from a discretionary spend perspective because it seems as though from a necessity perspective those which are sort of your grocery retailers fared a little better than, I’d say, your clothing retailers and what consumers might then consider discretionary spend or what they can cut back on.

Is that an accurate reflection of consumer decision-making throughout the 2025 year?

SIMON BROWN: I think absolutely, spot on. I’m looking at the returns – and the bottom of the list is the clothing retailers.

The exception is Spar, down almost a third over the course of the year. Spar, of course, has had its own challenges and those challenges are well known. There is the SAP rollout in KZN, Europe. Those are both now resolved and behind Spar. They’ve now just got to get market share back.

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But if you look at Woolies and Shoprite, they were both down in the year, but mid-single digits. So not massive. Again, relative to the JSE, not great – and certainly they were coming through with what I think we would call solid results. They weren’t necessarily knocking it out of the park.

Woolies is still struggling in Australia. Their fashion started to work a bit.

But Shoprite, which is the absolute leader in terms of groceries, of food retail in South Africa, was doing okay, coming out with decent numbers. The share price didn’t reflect it.

That is a bit of a head-scratcher, but that is something which Shoprite does often do. In other words, it’ll sort of get ahead of itself and become a little expensive; then it often won’t sell off, it’ll just kind of go nowhere for a year or two, or maybe even three as those earnings try to catch up.

Interestingly, new kid on the block, Boxer, which was listed last year, was one of the top performers. They are sort of mid-teens this year in terms of the space. They’re the new one. They were spun out of Pick n Pay last year and really are the key focus at the lower LSM market.

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Your point is 100% right where we see that in non-discretionary, in food, there was still activity, there was still growth. There were still margins and revenue increases ahead of inflation.

It was that more discretionary area, the clothing, where suddenly maybe consumers say: ‘Maybe we can wear that for another season or another year or something. We have to eat. We don’t always need to change our wardrobe.’ That showed starkly in the returns this year.

JIMMY MOYAHA: Speaking of things that we have to do and things we don’t have to do, I want to take a look at the retailers having to contend with operating costs. These costs for many of the retailers haven’t changed, but what we are seeing is perhaps a bit of a shift in how retailers are approaching their business models. We’re seeing some streamlining of business or streamlining of assets, a selling off of non-core assets.

In the case of some of the retailers, we’re even seeing them reduce their footprints in shopping malls and taking up smaller spaces, because every cent counts and cutting back on unused floor space is probably one of the easiest ways for retailers to do that.

How do we anticipate that the operating costs of retailers are going to continue to be impacted if we are now still under a situation where consumers remain under pressure, even if interest rates seemingly are coming down at a rather slow rate?

SIMON BROWN: Yes, so they have. And, if you stay with the grocery retailers, they have a particular challenge. Food inflation has come down quite a bit.

In results earlier, we had Shoprite who were proudly saying I forget how many thousands of items were the same or a cheaper price than a year ago. That’s great for you and me and the listener out there, who are going to go and buy our whatever, and discover it’s the same or even a rand or two cheaper. That’s lovely. For [the retailer] it hurts, because that’s their revenue, which is not growing, but their costs are. And that’s the point you’re making – their costs are hurting.

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It’s not just the rental and staffing which are important. It’s Eskom; it’s mitigating water outages which is a huge expense for them as well. So we’ve certainly seen, particularly in the case of Pick n Pay, a rationalising, closing a lot of stores, some of those spaces. I’m thinking of Hyde Park up here in Johannesburg being taken over by a Checkers store.

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Checkers is still being still fairly aggressive in their expansion across their brands and importantly also across different categories.

These companies are no longer just food. They’ve got pets, they’ve got clothing, they’ve got liquor, they’ve got all the other different components at the same time.

But there has been some rationalising. I usually expect to see more of it, but we typically don’t. We always see new stores opening. Clicks there – one of their claims to fame is, I think, that 85% of South Africans are within five minutes of a Clicks store. That’s great for the 85% of South Africans, but it means Clicks has a lot of overlap, and I often wonder why we don’t see more rationalising.

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Truthfully, a lot of it happens in the background and doesn’t make headlines, but I think that we are sort of at that point where some of the retailers are saying, ‘Do we need as many stores, do we need our stores to be as big?

If the store is not performing, is it not just close it rather than hang onto it, sort of to try and defend it against a competitor?’ I think they’re becoming a little sharper with sort of cutting and reducing than perhaps they were in years past.

JIMMY MOYAHA: If you’re just joining us, we’re in conversation with Simon Brown of Just One Lap, taking a look at the performance of retail sector stocks over the 2025 calendar year. We’ve been trying to make sense of some of the standout performers and some of the driving factors in this particular segment.

Simon, you touch on the reshaping and the rethinking that the businesses and the retailers have to potentially do. How then do you get it right? As we are going into 2026, what’s the secret sauce? Clearly some retailers are faring better than others. You mentioned the likes of Clicks and I think about them and the Spur Corporation. These are two very distinct retailers that have made it clear in this year that they’re expanding into next year.

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Just last week we got a confirmation that Mr Price was looking to potentially expand into Europe. The market didn’t seem to like that as well. How do you then start to identify what a good model is, what a stronger strategy becomes? Or is it now down to the particular market or the particular offerings to consumers that might govern your strategy a bit more?

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SIMON BROWN: I think it’s simple and it’s important to be clear. It’s simple to say, but maybe not to execute. It’s about value. It’s about value for the consumers. Do they feel that they’re getting bang for their buck?

Let’s stay with Shoprite. One of the clever things they do is you swipe your card and on the till slip they tell you how much you saved in that particular shop; they tell you how much you’ve saved over the lifetime of being a member of their savings card. Sometimes I walk out and I’ve saved R6 on a couple of litres of milk. But you kind of feel a bit of a spring in your step. Aren’t I a clever shopper? I think it is about that value. It’s about rewards programmes. It’s going to be giving that value to the consumer.

That’s something which Pick n Pay, I think, really lost their way in over many, many years. If you think back, older listeners will remember Raymond Ackerman and the fight against the fixed bread price and the fixed fuel price. He really was seen as a consumer champion. Pick n Pay lost that sort of mantra. And with that they lost customers in foot traffic at the same time.

When we are spending our hard-earned money – whether it be discretionary or not – we really want to feel that we are getting good value for that, that we are clever shoppers, that we have shopped smartly in this environment.

A lot of that is soft, more than necessarily actual real touchpoints. Truthfully, just a couple of rand saving on milk. The real story there is, well, why have they put it at one price and then offered me a discount on it? Why don’t they just reflect the price? It’s that perception. And I think that is going to be the big challenge.

This is not just a South African retail scenario. This really is a global phenomenon where you get that perception.

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I think it’s part of the Sixty60 process, which is the speed of that delivery which really gives you such a good sense of value. You’re on the app and within the hour you’ve got the product. That really screams good service and good value to you and really is the new front that retailers are having to focus on.

JIMMY MOYAHA: Simon, are there any retailers that stood out to you from a performance perspective, or which you might have your eye on going into the 2026 year? I think about a lot of the decisions that have been made by retailers exiting European markets, coming back home, trying out new markets and realising perhaps that’s not for them. Others are going out into the market – the likes of Famous Brands partnering with another local entity in the new regions they want to expand into.

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Is there anything for you at the moment that stands out that says, you know what, this could potentially be quite beneficial in the retail sector, or this is something to watch?

SIMON BROWN: Well, let’s touch on Mr Price. You alluded to them a moment ago. They had a horror year. They’ve had even [more of a] horror December after that announcement of an almost R10 billion deal into Eastern Europe. Let’s park that aside for a second.

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They were looking attractive. They absolutely were looking attractive in terms of valuation, in terms of that value offering, in terms of really, really good management and in terms of again – and I’m almost repeating what I would have said a year ago – a consumer that is in a better space. It’s still a tough space, but there certainly is that value proposition that comes from Mr Price. They certainly were on my radar. The deal got announced, a R10 billion deal, and the market hated that. The stock was down 10%, 12%.

I don’t know necessarily that it’s the mechanics of the deal or if it’s just a broader sense that we’ve got too many horror stories of companies going offshore and failing – Woolies, Famous Brands, and the list goes on.

To be clear, there have been some success stories, but we kind of forget about them.

In the webcast that followed the announcement of the deal, the executives were making it very clear: ‘This is not a fix-up’. This is not what Spar was trying in Poland and many of the other purchases. This is a 60-year business operating across seven different countries, with the same sort of value proposition that Mr Price has.

So notwithstanding the offshore deal in the market, not liking it, I thought Spar was looking fairly attractive at points.

Shoprite is always a great stock and at current levels I think we’re getting it at a at a decent price. And Clicks is just an absolute top, top, top retailer.

In fact, we’ve had foreign net sellers of our equities over the last many, many years. If they start to return – and they’ve been buying our bonds, so maybe they will start to start buying our equities – I think certainly Clicks would be on their shopping list.

And I like the vehicle retailers. I know it sounds weird, but we saw some decent numbers out of CMH.

WeBuyCars maybe had a bit of a tough time, but I think they’d got ahead of themselves and I still think that there’s some opportunity there. Yes, the Chinese cars are coming in. They’re markedly cheaper, but half of the vehicles that CMH sells these days are Chinese vehicles. So I think there’s some opportunity there as well, because certainly this is not an expensive stock by any stretch.

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So I think there is opportunity. I don’t think it’s going to do what our precious-metal miners did in 2025, but I think there are some good stocks that we can pick up at decent valuations.

JIMMY MOYAHA: Simon, is that opportunity further enhanced by the prospect of 75 to potentially 100 basis points in interest-rate cuts coming into the 2026 year, which we know, obviously, from a Reserve Bank perspective, could be very ambitious to expect of them. But would that bolster the retail sector?

SIMON BROWN: It absolutely would. The rate cuts that we have had already, the 1.5%, have saved households a little over R1 000 per R1 million bond. That is R1 000 that goes directly into their pocket every month.

Now some might go to debt, some of that might go to more pressing needs. I’m thinking education. I’m thinking transport, insurance, those sorts of things. Absolutely.

But some of it is going to find its way into that more discretionary space, the likes of clothing, the likes of a Spur – again a company that has a great value proposition and is a firm favourite among South African households.

So I don’t know how many cuts we’re going to get next year. On the cautious side maybe just two, as you say. On the optimistic side, maybe as many as three or four. But every one of those rate cuts does put money back into pockets.

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There are green shoots in our economy. We are off the grey list. We’ve had the S&P upgrade. We had the good Medium-Term Budget Policy Statement from the minister. We’ve got the new inflation target. There are absolute green shoots in our economy, something we haven’t seen for a decade or a decade-and-a-half now.

To be clear, that doesn’t mean that there aren’t risks. It doesn’t mean we’re out of the woods. It doesn’t mean that the green shoots couldn’t shrivel up and disappear.

But if those start to come through and we get a slightly better GDP, employment ticking down a bit and a little bit of a stronger rand coupled with weaker oil that takes our fuel price down, that again puts money into the pockets of consumers.

There is a good story here. Maybe ‘good’ is too strong a word – that was the word I would have used a year ago, and I got ‘punched in the face’ for that one, to misquote Mike Tyson.

But I think there is a story here for the consumer. And from the trend that we’ve seen over the last sort of 15 months for the consumer, there are strong prospects of that continuing into 2026.

And the hype of 2024, which we spoke about earlier, I think has washed out most of these stocks – particularly if you look at the likes of a fishing group down 50% and Mr Price 30%-odd lower.

JIMMY MOYAHA: Despite a tough year in the retail sector, it may not all be doom and gloom.

There may be some really good opportunities to take advantage of as we head into the new financial year and calendar year, but we’ll have to see how that shapes up and whether or not the market continues to find fault with how some of the retailers are performing from an operational standpoint.

For now we’ll leave this conversation on that note. Thank you so much to the founder of Just One Lap, Simon Brown, a good friend of our show, who joined us to take a look at the retail sector and help us make sense of some of its factors.

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