South Africa’s general retailers index posted its biggest daily loss in nearly two weeks on Monday, capping gains on the bourse after ratings downgrades last week knocked the rand currency, raising the prospect of inflation curbing consumption.
The rand extended its recent losses as the credit downgrades to “junk” by two ratings firms last week following the sudden firing of the finance minister kept investors jittery.
The general retailers index shed 2.77% on Monday, bringing its decline to around 12% since March 27 when President Jacob Zuma recalled finance minister Pravin Gordhan from an overseas investors roadshow, before firing him in a cabinet reshuffle.
Massmart, majority-owned by Wal-Mart, lead the way, falling 4.85%.
“It looks like people are starting to realise that these downgrades will cause the economy to slow down, that’s generally a negative for retailers,” said Cratos Capital equities trader Greg Davies.
Overall, the market closed higher. Advancers included Anglo American, which closed 1.6% higher after announcing it would sell its Eskom-linked thermal coal operations in South Africa for $166 million, marking an important step in strategic overhaul to sharpen its focus.
The broader All-Share index increased 0.54% to 53,139.86 points, while the benchmark Top-40 index added 0.73% to 46,422.49 points.
On the foreign exchange market, at 23:50 the rand traded at 13.9501 per dollar, 1.20% weaker from its New York close on Friday.
In fixed income, the yield for the benchmark government bond due in 2026 climbed 7.5 basis points to 9.005%.
By Olwethu Boso for www.moneyweb.co.za
The share price of Wallmart’s South African subsidiary Massmart fell 4.4% to R111 on Tuesday morning after it reported overall sales growth excluding new stores failed to keep pace with inflation.
Massmart reported sales for the 44 weeks to October 30 excluding new stores was 5.3%, lagging behind product inflation of 6.4%.
Including new stores, sales grew 7.6% to R73.2bn from matching 44 weeks in 2015.
“Sales growth has declined, reflective of the tough trading conditions in SA and, more recently, in most African countries where we have stores,” the company said in its sales update on Tuesday.
“Although slowing marginally food and liquor sales continued to perform well and Massbuild is showing signs of a sales recovery. General merchandise sales remain compromised by low consumer confidence, drought-affected food inflation and higher-priced imported products.”
Massmart splits itself into four divisions.
Fastest sales growth of 10.7% was reported by Masswarehouse which houses the Makro and Fruitspot chains. Excluding new stores, sales growth was 7.5%.
Next was Masscash whose brands include Jumbo, Shield, CBW, Rhino Cash & Carry, Tridant, Saverite and Cambridge Food. It increased by 7.9%. It appears to have closed numerous outlets since same-store sales growth was 8.5%.
Massbuild — which houses Builders Warehouse, Builders Express, Builders Superstore and Builders Trade Depot — grew sales 5.7%. Excluding new stores, sales growth was a more muted 1.1%.
Game and DionWired division Massdiscounters increased sales by 4.6%, but only by 0.5% when excluding new stores.
By Robert Laing for www.businesslive.co.za
Wall Street’s love affair with Amazon has been rekindled following shares climbing by nearly 10% on Friday after Amazon reported a better-than-expected profit.
Amazon shares have been on a tear since early February, surging about 45%. Amazon is now back in breakeven territory for the year and less than 2% below the all-time high it hit in December.
Warren Buffett is a big fan of the company too apparently – even though his Berkshire Hathaway does not own the stock.
Buffett went out of his way several times to praise Amazon and CEO Jeff Bezos during Berkshire’s annual shareholder meeting on Saturday. He did so again on CNBC Monday morning.
Amazon’s triple-digit P/E ratio probably scares off Buffett – who is a consummate value investor.
But it’s telling that he is willing to admit how successful Amazon is – especially since it would appear that much of that success is coming at the expense of Walmart, which is one of Berkshire’s biggest investments.
Amazon passed Walmart in market value for the first time ever last July. It is now worth about $320-billion – nearly $110-billion more than Walmart.
Analysts think Amazon has a lot more room to run too. The consensus price target is just shy of $800 a share. That’s almost 20% higher than current levels.
R.J. Hottovy, an analyst with Morningstar, says that Amazon’s international units are starting to pick up steam. He expects that Amazon will add a lot more Prime members in Europe and Japan in the coming quarters.
He added that Amazon seems a little more focused now and is less prone to invest in non-core businesses that may not really help boost Amazon’s revenues and Prime member base. Remember the Fire Phone flop?
“The biggest investment risk with Amazon is Jeff Bezos’ brain. It all depends on how aggressive Amazon wants to be,” Hottovy says. “As long as Amazon’s investments build the user base, then I still think there is some upside to the stock.”
Clothing is one of those investments that should boost revenue and profits.
The company recently has started to sell its own private label clothing brands. John Blackledge, an analyst with Cowen, wrote in a recent report that he expects Amazon to become the biggest apparel retailer in the U.S. as early as next year.
Yes, Amazon often gets criticised for heavy investments in free shipping and new businesses.
But Michael Pachter, an analyst with Wedbush Securities, says those initiatives appear to be paying off. Gross margins surged in Amazon’s most recent quarter.
The stock is extremely expensive. It trades at nearly 130 times 2016 earnings estimates of $5.33 a share. But Pachter says that investors buying Amazon today are taking a much longer-term view.
“You’re not paying this much for Amazon because you like the quarter. You’re paying this much because you think earnings are going to go up a lot,” he says.
“The only reason for it to trade at this valuation is because people think Amazon will make $20 to $30 a share a year someday,” Pachter adds.
Buffett might even believe that. But don’t hold your breath waiting for him to buy the stock anytime soon. It’s still way too rich for his blood.
By Paul R. La Monica for www.abc17news.com
The stationer’s toner powder factory in Switzerland may close, as the parent company sells 25-million shares to Singapore-based investors.