South African Retailers Slump as Woolworths Clothing Sales Dropby
Woolworths clothing sales at Country Road unit also fell
Shares of food retailers follow clothing retailers lower
South African retail stocks slumped, heading for the lowest in almost seven months, after Woolworths Holdings Ltd. said clothing sales fell, adding to similar recent declines reported by local competitors.
The eleven-member FTSE/JSE Africa General Retailers Index retreated 4.1 percent in Johannesburg, heading for the lowest level since April 24. Cape Town-based Woolworths tumbled 3.7 percent to 67.68 rand by 2:55 p.m. in Johannesburg, the lowest for more than two years and extending the decline by the owner of Australia’s David Jones department stores to 33 percent in 2016.
“As inflation rises, we are seeing South African retail coming to a grinding halt,” Alec Abraham, equity analyst at Sasfin Securities, said by phone from Johannesburg. “Even the wealthier consumers are now feeling it.”
Discretionary spending is under pressure from an unemployment level of 27 percent, the slowest economic growth since 2009 and rising interest rates. Inflation has been above 6 percent most of this year. Comparable sales fell at Woolworths’ South African clothing and general merchandise unit, as well as at its Australian Country Road business. Trading has been difficult in both countries, it said in a statement Friday.
Mr Price Group Ltd. led the decline among retailers, falling 7.5 percent. The clothing and household-goods company warned two months ago that first-half earnings would probably decline as it experienced the weakest winter season in more than a decade. Mr Price’s stock has slumped 39 percent since that announcement. It’s expected to report earnings on Nov. 14.
The drop in the general retail index was followed by a decline in the FTSE/JSE Africa Food & Drug Retailers Index, which fell as much as 2.2 percent, led by Pick n Pay Stores Ltd.’s 5.8 percent drop.