Ah, South Africa — land of electricity shortages, other than on important public holidays. You can accuse Eskom of many things, but let it never be said that it doesn’t put the jol above the economy. With yet another long weekend of braais and gorgeous weather behind us, there was minimal load-shedding over the Easter weekend.
From a consumer spending perspective, that’s just what the country needs. People feel better after spending time with loved ones, so they arrive at work after a long weekend with renewed spirit, ready to face the inevitable return of load-shedding. Heck, you might even find a stray Easter egg in a Joburg pothole.
Jokes aside, there are a few sectors that a long weekend like this touches. With religious festivities observed by Christians, Jews and Muslims in April, it’s an important cultural period. Celebrations tend to cost money, regardless of whether you follow a particular faith or simply take advantage of two days off work to swim and pig out on chocolate.
The obvious winner in this is your local grocery store. With families gathered around the table, spend shifts away from restaurants towards ingredients for meals prepared at home. I hope Pick n Pay received some of your love over the long weekend, because it really needs it.
In the 52 weeks to February 26, Pick n Pay expects headline EPS to be down by 12%-18% (excluding business interruption insurance proceeds and hyperinflation distortions linked to Zimbabwe). Those who are relatively new to the market are more shocked than President Cyril Ramaphosa to see results like this from a supposedly “defensive” business.
I’ve written many times about how defensive these businesses truly are. There are categories that are defensive, such as consumer staples, but at group level Pick n Pay certainly isn’t defensive. Aside from the obvious point that consumers can simply put less in their trolleys, they can also shop at competitors. A defensive sector doesn’t mean every participant in that sector is defensive.
A defensive sector doesn’t mean every participant in that sector is defensive
Even category-level defensiveness comes under pressure when inflation is rampant. You might assume canned food is a bulletproof category, yet RFG Holdings is reporting weak consumer demand. Again, canned food ranges from baked beans to tinned peaches, and one is a staple while the other certainly isn’t.
The Easter bunny didn’t only have to dodge canyon-size potholes and taxis trying to pay their debts to Transaction Capital last weekend. The poor thing also had to avoid an army of Checkers Sixty60 scooters feeling inspired by Brad Binder to bring down their delivery times.
Unlike Pick n Pay, Shoprite reported growth in diluted HEPS of 10.2% for the 26 weeks ended January 1. That is a huge swing in favour of Team Brackenfell against Team Kenilworth, reminding the market that Shoprite operates a significantly superior business.
Notably, it has just opened a clothing concept called UNIQ, where the garments are hopefully more unique than the logo. Within hours of its launch, Twitter was buzzing with comparisons to Japanese chain Uniqlo. Astonishingly, there are three launch stores and Gauteng has been ignored entirely. Canal Walk, Ballito Junction and, of all places, Secunda Mall cracked the nod.
Why is UNIQ important? Pick n Pay has had great success with its clothing business, one of the isolated pockets of true excellence in the group. Shoprite isn’t blind to this success and isn’t going to let Pick n Pay rule the category without a fight.
The retailers have learnt from their experience of allowing Clicks to build then dominate health and beauty, perhaps the most appealing of all retail categories because of the mix of defensiveness and margin.
There’s that word again: defensive. Ironically, some of the most defensive goods are the most expensive, which is why the luxury industry commands such high multiples. If you thought your egg purchases over the weekend were costly, search online for the egg-shaped jewellery manufactured by Fabergé and prepare to feel poor. Unlike the rest of Gemfields’ strong brands, Fabergé doesn’t even make a profit. It just makes absurdly priced eggs.
I’ll stick to the chocolate variety, thanks. Preferably delivered in under 30 minutes on a green scooter to save me the hassle.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.