Is there a retail revival ahead? BD 20 Feb 2001

INVESTORS hoping that there is life after all in SA's retail sector would do well to focus on cash flow, rather than earnings, when results are released this week.

For a change, there was something of a retail rally on the JSE Securities Exchange SA yesterday.

The share prices of Pepkor, Profurn and McCarthy Retail, which report results this week, shot up 9%, 12% and 18% respectively. JD Group was up almost 3%, and Cashbuild was 10% higher.

Is the recovery a dead-cat bounce, or can we discern the first signs of a revival?

It is possible that better-than expected results from Woolworths and Truworths have given the market a false sense of security. (In this case, 'better than expected' translates into 'down, but not out'.)

Analysts remain decidedly unenthusiastic about retailers' finances, preferring to focus on cash flow rather than revenue and headline earnings.

It no longer helps to be able to produce an impressive turnover and earnings numbers on paper. What matters is how sales and profit translate into cash.