{"id":17912,"date":"2026-02-02T02:59:50","date_gmt":"2026-02-02T02:59:50","guid":{"rendered":"https:\/\/microvibenews.com\/?p=17912"},"modified":"2026-02-02T02:59:50","modified_gmt":"2026-02-02T02:59:50","slug":"gloves-are-off-in-retail","status":"publish","type":"post","link":"https:\/\/microvibenews.com\/?p=17912","title":{"rendered":"Gloves are off in retail"},"content":{"rendered":"<p><\/p>\n<div id=\"textFreeArticle\">\n<p><iframe loading=\"lazy\" src=\"https:\/\/iframe.iono.fm\/e\/1641053?layout=modern\" width=\"100%\" height=\"170\" frameborder=\"0\" data-mce-fragment=\"1\"><\/iframe><\/p>\n<p>You can also listen to this podcast on iono.fm here.<\/p>\n<p>Welcome to the\u00a0Supernatural Stocks podcast\u00a0on Moneyweb, with your host\u00a0The Finance Ghost\u00a0\u2013 your weekly fix of local and international insights for investors and traders.<\/p>\n<p>It\u2019s getting spicy out there in the local retail sector. We are in a world that is very far removed from the \u2018rising tide that lifts all boats\u2019 environment that allows the weak to survive while the strong quietly pull ahead. In the current state of play, the weak are drowning and the strong are happy to just be treading water.<\/p>\n<p>It won\u2019t be news to you that stocks in the retail sector have had a terrible 12 months. I\u2019ll just pick out a few names here: Foschini Group down 40%, Truworths down 31%, Pepkor up just 2%. See what I mean about drowning versus treading water?<\/p>\n<p>There are a few reasons why this is happening.<\/p>\n<blockquote>\n<p>But they all come down to one thing at the end of the day: in the broken names, there is a part of the business that is dragging the rest down.<\/p>\n<\/blockquote>\n<p>It\u2019s usually an offshore business, with Truworths as the exception that proves the rule. You can refer back to a recent episode of Supernatural Stocks where I explained my distaste for the Mr Price-NKD deal, a transaction that flies in the face of market sentiment and most definitions of common sense.<\/p>\n<p>Listen\/read: Why the Mr Price deal sucks<\/p>\n<p>Recent announcements in this sector have focused on the performance in the final quarter of 2025. It was a tough period, as the base for comparison (Q4 2024) was boosted by South Africans taking their retirement savings and spending them on consumer products thanks to the two-pot withdrawal system.<\/p>\n<p>I try hard not to think about pensions going into new TVs. I try even harder not to think of pensions going into online betting!<\/p>\n<p>Read:<br \/>Online betting advertising spend soars<br \/>South Africa weighs 20% tax on online gambling<\/p>\n<p>Aside from reading company announcements in detail, it\u2019s always worth checking out the Stats SA retail trade sales data. The latest available stats deal with November 2025, a month which features the Black Friday trading rush.<\/p>\n<p>Before I dive into what we can learn from the Stats SA report, I want to highlight that the theme across retail releases has been that Black Friday was really strong. The word \u2018record\u2019 has come up a few times. Management teams are talking about a pull-forward of festive season trading into November.<\/p>\n<p>I think there are two reasons for this.<\/p>\n<p>The first one is that South Africans are bargain hunters of note, and for better or worse, Black Friday is perceived as offering the best deals. On many occasions, I\u2019ve had discussions with retail execs around price sensitivity of South African consumers \u2013 one of the features that makes it a tough market.<\/p>\n<p>Read:<br \/>Black Friday 2025: A fight for the R370 shopper and fastest delivery<br \/>PnP Survey: 70% of shoppers to hunt for essentials this Black Friday<\/p>\n<p>The other reason is that online shopping adoption is going through the roof, which means that festive shopping is being done on smartphones rather than by walking from store to store.<\/p>\n<div class=\"visible-sm-block visible-xs-block m1010\">\n<div class=\"ad-container-wrapper\">\n<p>ADVERTISEMENT<\/p>\n<p>CONTINUE READING BELOW<\/p>\n<\/div>\n<\/div>\n<p>Even if you\u2019re sitting in the office on Black Friday, you can still spend some time locking in those deals and getting them delivered to you. Long gone are the days I remember from my childhood of being taken to multiple chaotic shopping centres trying to find those last few items.<\/p>\n<blockquote>\n<p>So, when we consider this Stats SA report, remember that Black Friday numbers are in here.<\/p>\n<\/blockquote>\n<p>Of course, Black Friday is also in the base period in November 2024, but if there\u2019s a particular shopping experience that is getting bigger and bigger every year, then it stands to reason that November\u2019s year-on-year performance would be flattered relative to, say, December<\/p>\n<p><strong>Understanding the Stats SA reporting<\/strong><\/p>\n<p>Stats SA isn\u2019t going to tell you how a specific company is performing. Instead, it aggregates all the data that it gets in the market and uses it to show how the entire sector is performing.<\/p>\n<p>Retailers use this data along with category-level information from the likes of Nielsen and GfK to figure out how they are performing relative to the market.<\/p>\n<blockquote>\n<p>Achieving growth in retail is all about managing each category and figuring out how to win \u2013 and where you should be playing in the first place.<\/p>\n<\/blockquote>\n<p>The biggest category is \u2018general dealers\u2019, which includes large grocery chains. This is why this category is nearly half of the market. The next largest is \u2018textiles, clothing, footwear and leather goods\u2019, with a mid-teens percentage contribution to the retail market. You hopefully get the idea in terms of how the reporting works.<\/p>\n<p>Listen\/read:<br \/>Local retail a mixed bag in 2025, but is there value?<br \/>Retail review 2025: \u2018It just wasn\u2019t the year for retailers\u2019<\/p>\n<p>Another important point is that Stats SA distinguishes between nominal and real growth. This allows users of the report to figure out the changes in volumes as well as total sales. They do this based on holding prices constant in 2019 terms.<\/p>\n<p>The two-pot period stands out clearly on this basis using constant prices, with total South African retail sales up 8% year-on-year in November 2024 at constant prices \u2013 that\u2019s an immense increase in volumes! This is the base that retailers were facing in November.<\/p>\n<p><strong>Volumes for me, but not for thee<\/strong><\/p>\n<p>So, what were the results?<\/p>\n<p>At constant prices, November 2025 delivered year-on-year growth of 3.5% in volumes. That\u2019s an acceleration from the 3% in each of September and October, but well off the growth seen in the start of 2025 against a very weak base at the beginning of 2024.<\/p>\n<p>It\u2019s really important to keep base effects in mind at all times, but the overall story here is that November\u2019s volumes were up 3.5% against a very tough base.<\/p>\n<p>Listen: Clicks shares look cheap after selloff<\/p>\n<p>The winning segment here is clear: \u2018pharmaceuticals and medical goods, cosmetics and toiletries\u2019 achieved growth of 10.1%. That\u2019s a huge increase in volumes, so you would expect the likes of Clicks to be cleaning up at the moment.<\/p>\n<blockquote>\n<p>Alas, Clicks had system issues that hurt their stock and thus their sales in the latest period, so they couldn\u2019t take advantage of this trend.<\/p>\n<\/blockquote>\n<p>Of course, we wonder who did take advantage?<\/p>\n<div class=\"visible-sm-block visible-xs-block m1010\">\n<div class=\"ad-container-wrapper\">\n<p>ADVERTISEMENT:<\/p>\n<p>CONTINUE READING BELOW<\/p>\n<\/div>\n<\/div>\n<p>Competition in this space is only going to increase over time, as health and beauty is a highly lucrative category with great margins, long shelf life and tons of private-label opportunities for the players in this space.<\/p>\n<p>Special mention must also go to \u2018household furniture, appliances and equipment\u2019 with an 8.9% increase. This helps explain why Lewis put out some encouraging numbers recently, although I\u2019ll explain a very important nuance later.<\/p>\n<p>Read: Lewis lifts revenue on resilient credit demand<\/p>\n<p>This retail segment has been doing particularly well actually. If you can believe it, November growth of 8.9% was considerably slower than 11.4% in September and 11.3% in October. Again, a big base effect more than a \u2018slowdown\u2019 as these are all year-on-year numbers, but interesting nonetheless and a strong performance over the three months.<\/p>\n<p>What about the beleaguered clothing retailers?<\/p>\n<p>\u2018Textiles, clothing, footwear and leather goods\u2019 could only manage a 2.3% increase, an incredibly weak outcome that they keep trying to blame on online betting. Yes, it\u2019s definitely a concern, but that doesn\u2019t explain why other categories have done so well, like furniture and other areas like health and beauty.<\/p>\n<p>Read\/listen:<br \/>The margin glow-up: why retailers love beauty<br \/>The risks of retail for investors<br \/>Truworths feeling the pinch in SA<\/p>\n<p>Perhaps people are just buying imported clothes from China instead of shopping at local stores? Perhaps people are tired of fast fashion and buying low quality clothes at higher prices? Maybe they\u2019ve realised that they don\u2019t need to buy clothes as often?<\/p>\n<blockquote>\n<p>I don\u2019t know what the reason is, but I will tell you that convenient scapegoats should always be treated with suspicion.<\/p>\n<\/blockquote>\n<p>Another category worth mentioning is \u2018Hardware, paint and glass\u2019 with a 3.9% increase in November. That\u2019s a surprise when you consider how poor the recent numbers at Cashbuild were.<\/p>\n<p><strong>What about inflation?<\/strong><\/p>\n<p>Another important way to view the data is through the lens of current prices, that is, with the impact of inflation included in the numbers.<\/p>\n<blockquote>\n<p>Mild inflation is a free ride for revenue growth at retailers, as consumers accept higher prices and are willing to pay them because they have no choice.<\/p>\n<\/blockquote>\n<p>This is only a benefit for profitability if prices in the store are increasing by a higher rate than the costs to run the business, something that is rare in South Africa where costs like energy, municipal charges and security run rampant.<\/p>\n<p>Mild inflation at least gives some protection against these things. But when inflation is very low, something that gets the South African Reserve Bank incredibly excited, retailers become sitting ducks who rely on volumes for growth.<\/p>\n<blockquote>\n<p>South African consumers are so used to being crushed by prices and other pressures that we don\u2019t seem to fill up our baskets just because prices are less onerous.<\/p>\n<\/blockquote>\n<p>We tend to be a conservative bunch \u2013 we\u2019ll look for the bargains, but we might not buy <em>more <\/em>just because stuff seems cheaper. And if you believe the clothing retailers, when we do have extra money, we would rather spend it on online betting instead of more goodies in our bags anyway!<\/p>\n<p data-start=\"336\" data-end=\"775\">Read\/listen:<br \/>SA retailers thrive amid Amazon\u2019s grocery grab<br \/>SA clothing industry applauds tax on online retailers Temu and Shein<br \/>The rise and rise of online shopping in SA<\/p>\n<div class=\"visible-sm-block visible-xs-block m1010\">\n<div class=\"ad-container-wrapper\">\n<p>ADVERTISEMENT:<\/p>\n<p>CONTINUE READING BELOW<\/p>\n<\/p><\/div>\n<\/div>\n<p>As we apply a lens that includes inflation, we may as well start with clothing. Inflation didn\u2019t help them much here, as sales were up just 2.7% compared to 2.3% at constant prices.<\/p>\n<p>That doesn\u2019t even touch sides in the context of operating cost inflation, which is exactly why we are now seeing such divergence in the share prices in those sectors.<\/p>\n<blockquote>\n<p>The tide isn\u2019t lifting all boats. No, if anything, the tide has gone out and a few names are swimming naked.<\/p>\n<\/blockquote>\n<p>Pharmacy and health and beauty retailers, on the other hand, are loving life. Their category grew 14% year-on-year including inflation, compared to 10.1% without inflation. You have to really mess it up to not make money in that environment!<\/p>\n<p>It\u2019s little wonder that all the grocery retailers continuously try and get a bigger slice of market share from players like Clicks and Dis-Chem.<\/p>\n<p>Now prepare yourself for perhaps the most surprising number of all \u2026<\/p>\n<p>Remember how well the furniture and appliances segment did, with that 8.9% increase at constant prices? At current prices, that segment is up just 4.1%. This tells me that there has been considerable deflation in this space, which explains why Lewis\u2019s sales growth isn\u2019t nearly as high as the growth in volumes suggested by Stats SA.<\/p>\n<p>Hardware, paint and glass increased 4.4%, just 50 basis points more than the growth at constant prices. I still have no real explanation for the negative surprise of Cashbuild\u2019s Q4 sales. Something seems to have gone quite badly wrong there.<\/p>\n<p><strong>Two-pot isn\u2019t out the system yet<\/strong><\/p>\n<p>In summary, and as we look ahead, it\u2019s clear to me that the two-pot impact leaked into the start of 2025. This is based on a look at the monthly sales at constant prices.<\/p>\n<p>Yes, there was a weak base at the start of 2024 as a mitigating factor, sure, but there was still some two-pot money left as people entered 2025. January 2025 sales volumes were up 6.8% and February was good for 4.6%. It then fell off a cliff, up just 1.7% in March 2025.<\/p>\n<p>Read\/listen:<br \/>\u2018Lipstick effect\u2019 powers SA\u2019s beauty arms race<br \/>Clicks looking to cement itself as the \u2018leader in beauty\u2019<\/p>\n<p>The 2025 exit velocity was weak. We don\u2019t have the Stats SA data for that month yet, but retailers generally had a bearish tone on December compared with November.<\/p>\n<p>Combined with the geopolitical mess in 2026 and what this usually means for consumer confidence, I\u2019m not overly bullish on retail sales for the first quarter of 2026.<\/p>\n<blockquote>\n<p>I suspect it will be several months until we start seeing better results from local retailers.<\/p>\n<\/blockquote>\n<p>This doesn\u2019t mean that individual retailers can\u2019t do well, of course.<\/p>\n<p>If I may borrow from the fantasy GOAT [\u2018Greatest of all time\u2019], JRR Tolkien and his character Faramir, it\u2019s time for retailers to show their quality. They don\u2019t need to resist the ring like in the story, they just need to resist the temptation to do crazy things instead of getting the basics right in a tough environment.<\/p>\n<p><em>Follow Moneyweb\u2019s in-depth finance and business news on WhatsApp here.<\/em><\/p>\n<\/p><\/div>\n<p><script data-cfasync=\"false\">\n            !function(f,b,e,v,n,t,s)\n            {if(f.fbq)return;n=f.fbq=function(){n.callMethod?\n                n.callMethod.apply(n,arguments):n.queue.push(arguments)};\n                if(!f._fbq)f._fbq=n;n.push=n;n.loaded=!0;n.version='2.0';\n                n.queue=[];t=b.createElement(e);t.async=!0;\n                t.src=v;s=b.getElementsByTagName(e)[0];\n                s.parentNode.insertBefore(t,s)}(window, document,'script',\n                'https:\/\/connect.facebook.net\/en_US\/fbevents.js');\n            fbq('init', '779812924991616');\n            fbq('track', 'PageView');\n        <\/script>#Gloves #retail<\/p>\n","protected":false},"excerpt":{"rendered":"<p>You can also listen to this po&hellip; <\/p>\n","protected":false},"author":1,"featured_media":17913,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[4],"tags":[11362,351],"_links":{"self":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/posts\/17912"}],"collection":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=17912"}],"version-history":[{"count":0,"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/posts\/17912\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/media\/17913"}],"wp:attachment":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=17912"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=17912"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=17912"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}