Woolworths Gains 2nd Day on BofA Buy Rating: South Africa Mover

Woolworths Holdings Ltd. (WHL), a South African food and clothing retailer, rallied as Bank of America Corp.’s Merrill Lynch unit increased its recommendation a day after Woolworths said earnings rose.

The shares climbed 3.5 percent to 67.29 rand as of 12:36 p.m. in Johannesburg, extending yesterday’s 8.6 percent gain, as it headed for the biggest two-day increase since Nov. 25, 2008. More than 3.6 million shares were traded, equal to 81 percent of the three-month daily average. Merrill Lynch raised Woolworths to buy from neutral.

The retailer, which sells international brands such as Country Road clothing and organic, free-range and speciality foods, yesterday posted a 27 percent increase in net income to 2.6 billion rand ($251 million) in the fiscal year through June.

“A lot of the other local food and clothing retailers are showing slowing conditions, but Woolworths is striving ahead,” Andrew Bryson, a derivatives trader at Nedbank Private Wealth in Johannesburg, said by phone today. “They have managed to outperform their peers and this may continue.”

Today’s rally pares Woolworths slide this year to 5.1 percent, compared with a 17 percent decline in the 11-member FTSE/JSE Africa General Retailers Index.

Woolworths said it expects continued demand from higher-income consumers to boost sales in the new fiscal year, even as growth in the local economy remains constrained. Shoprite Holdings Ltd. (SHP), South Africa’s largest retailer, and Massmart Holdings Ltd. (MSM) last week said that sales growth slowed as consumers struggle to repay debt and unemployment rises, with lower-income earners particularly under pressure.

To contact the reporter on this story: Janice Kew in Johannesburg at jkew4@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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