Johannesburg - South African retailers Foschini and Truworths reported a jump in sales on Thursday, boosting their stock prices further as investors bet consumers will carry on shopping thanks to wage increases, cheap borrowing and government grants.

Share prices for retailers in Africa's top economy have surged over the past two years, with some more than doubling, which is beginning to give some investors cause for concern.

“We don't believe that you can carry on seeing this kind of growth,” said Nic Norman-Smith, chief investment officer at Lentus Asset Management in Johannesburg.

“You've got an increasingly indebted consumer base who are feeling stronger because they're earning more. They're even more bullish to take on more debt.”

Household debt in South Africa stands at 76 percent of disposable income, according to government statistics, while the unemployment rate is stuck at about 25 percent.

Retailers have also been helped by a surge in unsecured lending - higher-risk loans such as credit cards and store credit. Unsecured loans surged 21 percent in the year to June and now total $43-billion, according to central bank data.

The Foschini Group, a retailer that sells everything from cosmetics to furniture and targets middle-class customers, reported a 13 percent increase in first-half sales on Thursday.

Bigger rival Truworths International, which targets up-market clothing shoppers, said sales in the first 18 weeks of its fiscal year rose by 16 percent, with the results boosting share prices further.

Shares in Foschini closed up 3.8 percent at 131.78 rand, bringing its gains this year to 22 percent while the Truworths price was up 3.1 percent at 99.89 rand, a rise of 34 percent so far this year.

The two best performing South African stocks this year are also retailers. Woolworths Holdings, which sells high-end food and clothing, has surged 78 percent and discounter Mr Price has jumped 75 percent, while the All-Share index is up 18 percent.

“If you look at their earnings multiples, or any other fundamental valuations... They appear very stretched on all of those metrics,” said Norman-Smith.

The median price-to-earnings ratio for eight of South Africa's largest retailers is 21 times, according to Thomson Reuters data, double the 10.2 times of the All-Share index.

Retailers have also been buoyed by expectations of further expansion into sub-Saharan Africa.

Foschini, which operates 98 stores outside its home market, said the lack of available shopping malls in sub-Saharan Africa was hampering its expansion on the continent.

“We follow shopping malls,” Chief Financial Officer Ronnie Steyn said.

“We could easily operate 350 or 400 stores in the rest of Africa over the next five years.”

Meanwhile, Truworths nearly doubled its number of shops outside South Africa to 29 in the year to end-June.

Highlighting lack of shopping infrastructure in the rest of the fast-growing continent, Africa's biggest supermarket chain Shoprite plans to invest $205-million on property development in Nigeria. - Reuters