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Surprise lift in credit demand triggers retail run on JSE

Johannesburg - Retail shares were among the top performers on the JSE on Tuesday as a surprising increase in the demand for credit in April is seen as an indication of improved conditions in the beleaguered sector.

Mr Price’s [JSE:MRP] share price gained more than 6% in morning trade, despite the news that the group announced the first drop in annual earnings in 16 years.

READ: Mr Price shares surge despite first earnings slump in 16 yrs

The rest of the market was however subdued, although most of the indices were moderately higher. The All-share index gained 0.36% to 54 127 points, while the Top 40 index was also 0.36% stronger at 47 764 points. 

Mr Price posted a 12% drop in full-year earnings, the first in annual profit since 2001, as consumers struggle in a sluggish economy.

The share price at mid-morning was however 6.03% higher at R155 after the group said it is seeing encouraging signs of an improved consumer environment in the current financial year. Any improvement will however only be gradual.

The mood was also supported by the announcement by the South African Reserve Bank that private sector credit demand growth rose to 5.9% in April from a revised 4.98% in March.

Mr Price stocks have been in the doldrums the past year, and before Tuesday’s strong move were more than 20% lower for the past year. The share price dropped 4.7% over the past month and 6.29% over the past 90 days.

The no-frills retailer, which also sells homeware and furniture, is facing increased competition from international chains Zara, H&M and Cotton On and has lost market share as local competitors, such as the ailing Edcon group, mark down stock.

Woolworths [JSE:WHL], which lost almost 5% over the previous seven days, at mid-morning was  2.48% stronger at R68.15. The share is more than 20% lower over the past year.

Truworths [JSE:TRU] was 1.68% higher at R76.26 and the Foschini group [JSE:TFG] gained 1.3% to R138.76. Before Tuesday’s trade Truworths was more than 20% lower for the year, while the TFG group lost more than 16% over the past 90 days.

Food retailers did not join the retail run and Pick n Pay [JSE:PIK] lost 0.56% to R59.93. Shoprite [JSE:SHP] traded 0.47% lower at R210.75, but the share price is only R1.00 below a 52-week high after it gained almost 20% over the past three months.

The rest of the market received limited support from the weaker rand, which dropped to R13.07 to the dollar in response to news that President Jacob Zuma seems to be in a stronger position than a week ago, after surviving another motion of no confidence at the weekend’s meeting of the ANC’s national executive committee.

The Industrial index, which includes most of the big dual-listed companies which earn a major part of their income in other currencies, was 0.32% stronger at mid-morning. The Financial index gained 0.14% and the Resources index lifted 0.50%.

Among the top shares Naspers [JSE:NPN] was only 0.17% higher at R2 803.60, just below the all-time high of R2 804.50. Steinhoff [JSE:SHF] lost 0.55% to R72.50, but Bidvest [JSE:BVT] was 1.08% higher at R170.57.

In the resources sector BHP [JSE:BIL] traded 0.92% stronger at R202.865 and Anglo American [JSE:AGL] gained 0.43% to R170.06.

The two big losers in the resources sector, Sibanye [JSE:SGL] and Lonmin [JSE:LON], continued on their downward spiral. Sibanye, which lost more than 36% of its value over the previous seven days, was 1.90% softer at only R16.50.

Shareholders are unhappy about the company’s planned rights issue which will offer new shares at a 60% discount to raise capital for the purchase of the Stillwater platinum mine in the United States.

Troubled platinum producer Lonmin was one of the biggest losers on Tuesday morning, trading 4.44% lower at R14.00. The group, which announced disappointing production results last month, already lost half of its value over the previous 90 days.

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Rand - Dollar
18.87
+0.3%
Rand - Pound
23.86
+0.2%
Rand - Euro
20.37
+0.3%
Rand - Aus dollar
12.31
+0.2%
Rand - Yen
0.12
+0.2%
Platinum
908.05
0.0%
Palladium
1,014.94
0.0%
Gold
2,232.75
-0.0%
Silver
24.95
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Brent Crude
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Top 40
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All Share
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Resource 10
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Financial 15
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