THIS ISSUE: 25 Jan - 31 Jan
YOUR NUMBERS THIS WEEK
RETAILERS AND WHOLESALERS
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Massmart Dad’s working late…
A trading statement from Massmart last week, and a corresponding -20% drop in the share price. According to the Men in Black, sales for the 52 weeks through December grew just +2.9%, or +1.2% on a like-store basis, with sales growth slowing in all divisions except Massdiscounters (Game and DionWired) over November and December, despite satisfactory Black Friday sales. Part of the problem is of course the state of our economy: no sooner was the Walmart acquiring finalized than the effects of Zumanomics (one for you, two for me, three for the party and a couple for the guy building the new stadium) started kicking in, leaving economic growth where it is now, at a shaky 1%. It could also be argued (as some analysts do) that neglect on the part of the new parent company has played a role: Walmart has had much bigger fish to fry in India, China and online than the African market. On the other hand, it is also argued that Walmart’s requirements in terms of organisational structure, processes and product standards, have shackled Massmart’s ability to operate lighter on its feet, making competing against the independents difficult – from the types of products on shelf through to the freedom to trade on the shop floor.
Comment: The one thing Massmart has never lacked is the ability to take a good hard look at what they could do better. This should stand them in good stead in a time when change seems needed.
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Shoprite Stock responses
Another trading update, this time from Shoprite, which reported sales growth of just +2.6% for the six months through December – 5 percentage points down from last year – and a decline of -13.3% in rand terms for sales beyond our borders, due in part to currency fluctuation in African markets. While the shocking economic climate has a role to play, Shoprite’s troubles have also been precipitated by a couple of own goals, including product availability challenges stemming from issues at the Gauteng DCs, and protest action against the new warehousing system. December quarter sales, on which all retailers depend, were actually -0.3% down YoY. On the upside, liquor sales grew +20% for the period. Some commentators are speculating that Shoprite may slow down its attack on African markets; while we have seen for ourselves that it is investing more heavily in its Checkers and OK franchise divisions. In other news from the Big Red One, it’s appealing the R20m Competition Tribunal fine imposed over the Computicket debacle we reported on a couple weeks back.
Comment: Shoprite, once apparently bulletproof, has encountered some inevitable headwinds. How it weathers these will reveal the true mettle of the business.
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Woolworths Carryings on
Still a little cynical about the power of social media, are you? Let’s take a gander at some number then. Did you know, for example, that of the 19,482 social media posts about Woolies, from 1 to 14 January, 46.5% were about the Ubuntu Baba story? That 14% of authors drew attention to the fact that Woolies had been involved in similar goings-on before? That 170 self-identified mums were responsible for a disproportionate 3.6% of the total conversation volume, and that 80% of what they had to say was negative? That net negative sentiment reached a nadir of around -65% on or about the 9th of Jan, but that it has ticked steadily upward to neutral? All of this from the helpful researchers over at Brandseye.
Comment: Did we learn anything from this people? It is fondly to be hoped we did.
MANUFACTURERS AND SERVICE PROVIDERS
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AVI Rough trade
Another gloomy trading update, this time from Anglovaal Industries Limited (AVI), which has let it be known that they grew revenue just +0.2%, from the R7.3bn they reported for the first six months of the year through December. This, they said, will send the headline earnings scuttling down by the tune of 7% or so. What gives? For one, I&J locked itself into fuel contracts, betting against a drop in the price, and we know how that went. The restructuring of the Green Cross shoe business will weigh heavily on the balance sheet, for another, and December sales over at Spitz weren’t all that, either. Elsewhere in the business, though, while sales were on the flat side, they weren’t as bad as they might have been: AVI has a strong portfolio of brands that are focused at the upper end of the market where cash – another strength of the business – is more abundant.
Comment: Still, a rising tide lifts all boats, they say, and we haven’t heard the rushing of the waters around here since the year dot.
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Tiger Brands Plenty more fish in the sea
Tiger Brands has taken a decisive step toward divesting itself of its 5.9% stake in Oceana Brands, which it has agreed to sell to Brimstone Investments for a consideration of a cool R581.44m. Oceana, as you will recall, is in the business of catching and selling canned fish, fish meal, fish oil, lobster, horse mackerel, squid and hake, with a side-line in refrigerated warehousing and logistical support services. Tiger is of the view that this business is a little too cyclical for their taste, and dependent on both quotas and catches. Word on the street is that AVI might be thinking similar thoughts about I&J. Brimstone, on the other hand, are all over it, and keen to lend their BEE credentials to the business, in which they already own a 17% stake.
Comment: Brimstone, which already own a controlling interest in Sea Harvest, are something of a whale in this industry, as it were.
TRADE ENVIRONMENT
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The Economy It’s ???…
When China sneezes, so they say, everyone learns pretty quickly to say “Bless You” in Mandarin. And with growth in that Asian behemoth slowing to levels not seen since 1990, everyone’s reaching out frantically for Google Translate. In South Arica’s case, a slowdown in Chinese production means a slowdown in demand for commodities – which are already under pressure as China makes the switch from commodity-intensive infrastructure investment towards consumption. Our commodities are good for bridges and railways, bottom line, less so for fridges and microwaves. In other economic news, Reserve Bank governor Lesetja Kganyago has expressed concern (from Davos) about how recent election year rumblings about the nationalization of the Bank will play with the Davos crowd. This as the Bank kept the repo rate unchanged as inflation held steady slap bang in the middle of its 3-6% targeted band.
Comment: If we had a couple more percentage points of GDP growth in hand, none of this would be quite as pressing as it is.
IN BRIEF
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Dis-Chem What, me worry?
#Januworry is apparently now a thing, thank you twitternet. But not, apparently for Dis-Chem, which has turned forty, and instead of buying a Ferrari or having an affair, they’re sensibly running forty-themed deals: 40% off, forty ronds off, two-for R40, that sort of thing. Us, we threw a party at Bean Bag Bohemia for forty of our closest muckers, but it takes all sorts they say.
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International Retailers Counter productive
Seismic stuff over at Tesco, which is looking at axing all of its meat, fish and delicatessen counters and downgrading in-store bakeries in order to get rid of around 15,000 excess human people and save itself £1.5bn from the overhead in order to stay afloat, as it struggles to bring back the profits it last saw before the accounting scandal of 2014. In other words, Tesco is not a real business, able to make a profit while employing people and giving customers what they want. In Italy, in the meantime, Lidl (which is a real business) is teaming up with online delivery service Supermercato24 to offer punters the convenience of shopping in the boxer shorts and string vests Italians habitually wear around the casa.
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