South Africa’s lacklustre economy, coupled with high unemployment, low business, and consumer confidence, is curbing household spending and wiping off billions in value for some of the country’s listed retailers. 

Massmart, which operates brands such as Game, Builders Warehouse and Makro, has lost 58.37 percent on the JSE in the year to date.

Shoprite, Africa’s biggest food retailer, has fallen 35.68 percent during the period, while Pick n Pay has weakened 12.39 percent and Spar has fallen 7.78 percent.

Clothing retailer Truworths has lost 39.82 percent, Mr Price has slashed 35.55 percent off its value, and The Foschini Group has lost 1.84 percent.

Woolworths remains 0.05 percent higher in the year to date, despite its problems, while Clicks has strengthened by 12.71 percent in the year to date.

Lester Davids, trading desk analyst at Unum Capital, said the weakening rand, which hit R15.20 to the US dollar, had contributed to the weakness of retail stocks.

“This raises the prospects for higher inflation, which in turn may restrict the ability of the SA Reserve Bank from easing monetary policy, which then restricts the consumer’s buying power,” Davids said, adding that the petrol price hike due tomorrow night may put the consumer under further pressure.

“These shares continue to trade on valuations which are relatively high in the context of the economic backdrop, including high unemployment, a weaker rand, and uncertainty around economic prospects.”
The retail sector’s year to date performance has been weak, mirroring South Africa’s ailing economy.

Peter Takaendesa, a portfolio manager at Mergence Investment Managers, said that while the big underlying factor for the low retail stocks had been a weak economy, the retail sector had suffered more from increasing competition, resulting in ongoing product discounting, despite increasing cost of imported merchandise or raw materials.

The rand remained soft to close at R15.1618 against the US dollar yesterday, after breaking through the R15.10 technical levels on Friday.

The gold price fell sharply by 5.55 percent to $1486.34 an ounce on the widening US-China trade war.
Harmony Gold fell 3.28 percent, AngloGold Ashanti was 1.45 percent lower and Gold Fields was 2.16 percent weaker.

The Gold Mining Index declined 1.62 percent to 2 253.71 points.