Massmart leads retail rally

170111 Massmart CEO Grant Pattison at shareholders meeting held in Sunninghill North of Simphiwe Mbokazi

170111 Massmart CEO Grant Pattison at shareholders meeting held in Sunninghill North of Simphiwe Mbokazi

Published Sep 13, 2013


Johannesburg - Massmart Holdings Inc., the South African supermarket chain owned by Wal-Mart Stores Inc., is leading the country’s index of retailers as it heads for the longest winning streak in nine months.

The 11-member FTSE/JSE Africa General Retailers Index, which includes clothing sellers Truworths International Ltd. and the Foschini Group Ltd., gained for a sixth day, the longest stretch since the seven days through December 7.

The gauge advanced 2 percent to 63,275.91, the highest on a closing basis since May 30, by 1:19 p.m. in Johannesburg.

South African retailers lost 9.2 percent this year, compared with the all-share gauge’s 11 percent gain, as investors sold stocks on concern that consumers are struggling to pay debt.

African Bank Investments Ltd., the nation’s largest unsecured lender, said May 20 that net income for the six months through March dropped 26 percent as bad debts rose.

“People are becoming a little bit less worried about the credit environment of the South African consumer,” Diane Laas, an equity analyst at Cape Town-based Investec Asset Management, which manages the equivalent of $105 billion, said by phone.

“Given the African Bank bad debt news, the market has been negative on the bad debt experience of credit retailers Truworths and the Foschini Group. People have been pricing a higher bad-debt scenario.”

Massmart, the country’s largest wholesale distributor, rose 9.7 percent since September 5, when the retailers gauge’s rally started, and advanced 3.1 percent to 171.70 rand, the highest in more than a month.

Foschini, which owns the Fabiani and Charles & Keith brands in South Africa, surged 9.7 percent in the period and increased 1.6 percent to 108.59 rand, the highest since May 30.

Reversal Due

The retailer index’s 14-day relative strength index rose to 70.3, a level that indicates to technical traders it may be overbought.

The gauge also pushed through the upper limit of its Bollinger band, a sign it may be due for a reversal.

Its stochastic oscillator is at 95, also implying an imminent turn.

South African consumers’ indebtedness, measured as a percentage of disposable income, rose 0.4 percentage point to 75.8 percent in the three months through June from the previous quarter, the Reserve Bank said in its quarterly bulletin released in Pretoria, the capital, yesterday.

The cost to service debt as a percentage of disposable income remained unchanged at 7.7 percent.

Woolworths Holdings Ltd., which sells international brands such as Country Road clothing and organic, free-range and specialty foods, reported a 27 percent increase in net income to 2.6 billion rand ($262 million) in the fiscal year through June.

Its stock climbed 1.2 percent to 74.56 rand today.

“The outcome of Woolworths’ year-end results and presentation is that there’s still some life left in the South African consumer environment,” Laas said. - Bloomberg News

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