South Africa’s retail sector plays a crucial role in the nation’s economy, contributing nearly 20% to GDP and serving as the second-largest employer after the government.
From an investment perspective, analysing emerging trends is essential, not only at sector and company levels but also as an indicator of the broader economic landscape.
Shoprite, Africa’s largest supermarket retailer, reported a robust 9.6% increase in half-year sales, reaching R128.6bn to end-December 2024. Its core division, Supermarkets South Africa, which contributes 83.7% of group sales, delivered strong growth of 10.4%, with like-for-like sales rising by 6.1%. This impressive performance was driven by festive season demand and an aggressive expansion strategy, with the addition of 248 new stores during the period.
Notably, this growth came despite internal selling price inflation of just 1.9%, underscoring Shoprite’s ability to drive volume-led sales by taking market share. This was particularly evident in its higher-LSM brand, Checkers, where sales climbed 13.5%, while its more value-focused brands, Shoprite and Usave, reported more modest 6.7% growth.
A key contributor to Checkers’s strong performance was its online delivery platform, Sixty60, which continued its rapid expansion with a 47.1% surge in sales. The Checkers Xtra Savings Plus subscription model, launched in early 2024, has also gained traction, offering unlimited free deliveries on orders of more than R350 for a monthly fee of R99.
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Meanwhile, former arch-rival and now distant competitor Pick n Pay had marginally negative overall sales in its core brand over 19 weeks as the company continued shutting down loss-making stores. However, like-for-like sales grew by 3%, marking an improvement. While this performance still lags far behind Shoprite, the pickup in like-for-like growth is encouraging. It was driven by improved price competitiveness and a robust 42.5% surge in sales from asap!, its food delivery platform.
With the retailer focused on stabilising market share, margins may remain under pressure as the company prioritises aggressive pricing and operational restructuring.
Soft discounter Boxer caters for middle- to lower-income urban, peri-urban and rural communities. It focuses on essential goods, bulk buying, fresh produce and a streamlined product range to keep costs low, and has become a key growth driver for Pick n Pay. It has been separately listed since November 28 2024, but Pick n Pay retains a 65.6% stake in it.
During the 19-week period Boxer delivered impressive sales growth of 10.8%, with like-for-like sales rising 5.5%. Its strong performance, coupled with the successful listing, has been instrumental in supporting Pick n Pay amid the group’s broader financial challenges.
Woolworths delivered a mixed performance over the past 26-week period, with its food division continuing to shine, posting 9% top-line growth, while the fashion, beauty and home segment struggled, managing only a modest 2.5% increase.
Online sales surged 37.2% and now account for 6.4% of total food sales. The division has been driven largely by the strong growth of Woolies Dash, its on-demand delivery service, which saw a 49.2% increase over the period.
Given the food division’s consistent strength over the years, some investors may argue that Woolworths should consider spinning it off into a separately listed entity. While unlikely in the near term, such a move could unlock value by highlighting the division’s market dominance and high-margin stability, potentially attracting investors focused on premium food retailing.
The only major food retailer yet to report at the time of writing is wholesaler Spar. With other food retailers seeing strong growth in their online delivery services, it will be interesting to assess whether this has had any effect on Spar’s convenience-driven model.
Analysts foresee a rise in food inflation in 2025, which could provide a tailwind for the entire sector.
The apparel segment delivered mixed results, reflecting varying levels of resilience across retailers.
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Mr Price reported total sales growth of 10.6% for the 13-week period, with comparable store sales rising 6.3%. A standout Black Friday weekend highlighted consumers’ preference for discounts amid their financial struggles. Given that apparel is a more discretionary category than food, there were hopes that two-pot pension withdrawals would provide a stronger boost to sales. However, with the South African Revenue Service reporting total withdrawals of only R43bn by January 31 2025 — below initial expectations — the effect was limited.
TFG showed a notable improvement from the first half of the year, recording 8.4% sales growth in the latest three-month period. Margins also strengthened, supported by a higher proportion of full-price sales during November and December.
Recent retail updates reflect a consumer under pressure but still spending
Pepkor delivered the strongest performance in the sector, with revenue rising 12.1% in the latest quarter. Growth was driven by its value-focused brands, Pep and Ackermans, alongside continued store expansion. Additionally, the group has diversified revenue streams through its high-margin fintech division, leveraging credit, cellular handset rentals and insurance.
In contrast, Truworths significantly underperformed its peers, struggling in the premium fashion segment, which faced greater headwinds than the value-focused market. Sales in its core South African unit declined by 1.1% over the 26-week period, with weaker margins. This was partially offset by an 11.3% sales increase in its UK-based Office business.
Clicks continues to strengthen its position in the health, wellness and beauty retail sector, as highlighted in its latest trading update. The company’s ongoing market share gains are supported by the steady rollout of pharmacy licences, reinforcing its competitive advantage. Over a 20-week period Clicks secured 27 new retail pharmacy licences following the resolution of the Unicorn Pharmaceuticals licensing issue. During this time sales grew by 8.1%, with comparable store sales rising 5.9%. This growth was driven by strong performances in the front-shop health and pharmacy departments, increased sales of private-label products and higher promotional activity, particularly during a record-breaking Black Friday. These trends once again underscore the price sensitivity among shoppers.
In the furniture sector, Lewis achieved a 9.1% increase in merchandise sales, with comparable store sales rising by 6.2%. Interest and other income surged 20.1%, driven by strong credit sales in recent periods. While there was a slight decline in collection rates, they remain solid at about 80%. Notably, credit sales accounted for 68% of total sales, significantly outpacing cash transactions and highlighting the financial pressure consumers are under. This trend aligns well with Lewis’s business model, provided that bad debt remains under control.
Building materials retailer Cashbuild delivered steady, if unspectacular, progress in its latest quarter, with sales rising 6%. The home improvement sector is beginning to show signs of recovery after a prolonged slowdown following the Covid-era boom. Executives will be watching closely, hoping these green shoots signal a sustained rebound rather than another false dawn.
In summary, recent retail updates reflect a consumer under pressure but still spending, with a strong preference for value-focused apparel retailers like Pepkor and Mr Price, which continue to outperform higher-end brands such as Woolworths and Truworths. In food retail, the market remains polarised — premium segments show resilience, while budget-conscious shoppers sustain the lower end. Overall, sales across most sectors have benefited from a significant moderation in inflation.
In the premium food retail sector, the growing popularity of online delivery services suggests a shift in shopping habits, potentially reshaping the competitive landscape for traditional convenience stores like Spar.
Meanwhile, the effect of two-pot pension withdrawals has been smaller than expected, leading to a notable share sell-off in recent weeks. This will be part of the baseline in future. Despite the sell-off, retailer valuations remain high, hinging in part on increased disposable income driven by lower interest rates. However, if rate cuts fail to materialise and inflation picks up, the retail sector could face a challenging short-term environment.
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