Consumer Industries Editor

THE confidence expressed by the management of retailers like JD Group, Foschini and Mr Price, who say that current favourable trading conditions will persist for another few months, is not reflected in their share prices.

The FTSE/JSE Securities Exchange SA general retailers index has fallen 10% in the past two weeks after touching a new peak of 20440 on January 3.

The biggest declines have been in the shares of Edcon, down 11% in the past two weeks, Woolworths Holdings, down 9,5%, Mr Price down 11,7% and Lewis Stores down 17%.

But retailers' shares were in favour in late November and early last month when prices ran up strongly on predictions that SA would enjoy a bumper Christmas trading season.

On Christmas Eve it was reported that South African consumers had embarked on their biggest shopping spree for 20 years, with spending estimated to have risen 17% to R20bn compared with the 2003 Christmas trading period. The most popular purchases were food, beverages, clothes, furniture and jewellery.

January trading updates from the major retail groups, covering the three-month or six-month period to end-December, show that, on average, sales growth over the festive season was good, an analyst, who asked not to be named, said yesterday.

Clothing retailers did well, although Mr Price and Woolworths were slightly below the average and Truworths, Edcon and Foschini were particularly strong.

Foschini's real sales growth for the quarter, stripping out new trading space and product inflation or deflation, was 13,3%, and rival Truworths was 12% for the 26 weeks to December 26 .

Within the Edcon group, Edgars' real sales growth was 17% and Jet's was 42% for the quarter.

Against that, Mr Price's real sales growth for the quarter was 8,3% and Woolworths' was 7,8% for clothing and homewares and 9,5% for food for the six months to December.

Among the furniture groups, JD Group said sales of merchandise last month alone exceeded R1bn for the first time and its total real sales growth was 24% for the four months to January 15.

But Lewis disappointed with 9% comparable store sales growth for the December quarter, even though price deflation in electrical goods, accounting for about half of sales, was about 9%.

Massmart, which was less positive about trading ahead of Christmas than other retailers, delivered a pleasant surprise with real sales growth of 12% for the 26 weeks to December 26.

" Even those retailers who performed below the average were still growing sales very strongly," the analyst says. "But these are heady numbers. It would be unrealistic to expect retailers to continue growing sales at 20% or more."

Imara SP Reid analyst Warwick Lucas says in a note to clients that the market appeared to have been looking for a continuation of the 12% real sales growth evident in retail statistics from August . This did not happen, "even though, in practical terms, the numbers are basically still good."

He says the market's reactions highlight that retail stocks are fully priced and vulnerable to a setback .

The Bureau for Market Research forecast this week that growth in retail sales this year would be about 8,5% over last year, with sales of semidurables such as clothing and footwear rising 10% and sales of foods and durables, 7%-8%.

Jan 20 2005 08:01:40:000AM Charlotte Mathews Business Day 1st Edition