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Johannesburg - The JSE's attention was focused on the retail sector on Thursday, with two iconic groups sharply down.
Woolworths [JSE:WHL] and Pick n Pay [JSE:PIK] both had steep losses, shedding in the region of 3% with other retail groups also trading lower, despite the news that retail sales grew strongly last month compared to the same month a year ago.
The drop in these share prices was caused by news that South Africa’s biggest investor, the Public Investment Corporation, lowered its interest in Woolworths, sparking fears that other investment houses might follow.
Retail shares were however not the only stocks losing ground as most of the major indices were also down, despite positive news about the economy. Before Wednesday’s strong retail figures, the latest manufacturing and mining data also surprised on the upside.
Analysts said political uncertainty continued to hurt the market after President Jacob Zuma’s controversial Cabinet reshuffle on Wednesday and shocking revelations exposed the extent of corruption at Eskom in a parliamentary hearing on state capture. Higher inflation figures on Wednesday also dampened prospects of lower interest rates.
The rand is under pressure for the same reasons and traded at R13.55 to the dollar, 1.17% lower than Wednesday’s close of R13.39.
The All-share index was 0.52% lower at 57 852 points at mid-morning, while the Top 40 index was 0.55% lower at 51 460 points. The Industrial index lost 0.52% and the Financial index was only 0.02% higher. Even the Resources index was 1.16% lower, despite the weaker rand.
Woolworths at mid-morning was 3.15% lower at R58.06, but fell almost 4% in early trade. The stock was one of the busiest on the market and more than 10 million shares were sold for R612m.
Woolworths is now facing many battles: an intensified war with its competitors via aggressive promotions for market share, SA’s ailing economy and the problem of burning cash as a result of the slow turnaround of its Australian business David Jones.
Although sales of the Woolworths group grew by a marginal 3% to R74.3bn for the year to June 2017, its clothing business is under pressure and clothing sales fell by 1.9% on a same store basis.
Pick n Pay traded 2.96% softer at R58.71 after its results did not convince investors. The group announced an increase in interim profits on Wednesday, but sales margins are still under pressure.
Diluted headline earnings per share for the 26 weeks to August 2017 grew by 13% to 90.36 cents. Trading margins – the key metric to measure profitability in the retail industry – grew to 1.6% from 1.5%. Shoprite, Pick n Pay’s closest competitor, is accustomed to interim trading margins of above 5%.
Other retailers also lost ground with Spar [JSE:SPP] 1.15% down, Dis-Chem [JSE:DCP] 1.1% softer, Shoprite [JSE:SHP] losing 0.35% and The Foschini Group [JSE:TFG] trading 0.27% lower.
Most of the big dual-listed industrial shares also lost ground. Naspers [JSE:NPN] shed 0.90% to R3 240.40 and British American Tobacco [JSE:BTI] lost 0.62% to R864.61. Anheuser-Busch InBev [JSE:ANH] was 1.32% softer at R160.00.
In the commodity sector, Anglo American [JSE:AGL] lost 1.72% to R251.28.
AngloGold Ashanti [JSE:ANG] was one of the few solid performers. It gained 3.01% to R128.25, after an announcement that it would sell its newest mine to Harmony Gold for $300m and another mine for R100m ($7.4m) to China’s Heaven-Sent SA Sunshine Investment Company.
