SIMON BROWN: I’m chatting with Arthur Karas, a portfolio manager at Old Mutual Investment Group. Arthur, appreciate the time today. If we look at the retail sector and go back four years – which of course was the pandemic – we came out of the pandemic, we’ve had load shedding, we’ve had high inflation, we’ve had high interest rates. It has been a monumentally difficult four years for the broader sector.
SIMON BROWN: Well, load shedding hasn’t gone, but my sense is that Corporate SA is learning to deal with it. The consumer remains under pressure. The pandemic, of course, is in the rear-view mirror. Are we expecting a better 2024 – even if only slightly better?There have been company-specific issues that have affected quite a few of these businesses.
We would also expect the share prices to perform a little out of step with the profits, because we are all looking forward; the stock market tends to discount the future. So we’re anticipating lower interest rates starting somewhere in the latter part of this year, taking a bit pressure off the consumer and typically the more consumer-leveraged companies. Those would be the clothing retailers.
As you said, I don’t need to buy the new T-shirt but I do need to have dinner for my family this evening. But the real crisis has been Pick n Pay. That’s been brewing for some time. That company is now really struggling. It certainly hasn’t provided any kind of defence for its shareholders. Some people still mention that load shedding affects consumer sentiment; it tends to depress people. So to make you cheerful you want to go to the shops.
SIMON BROWN: Are there any in the broad retail spaces we look at? Shoprite’s absolutely one of them. We have touched on that. Others that have really navigated what, as we said at the top of the show, has been a really, really tough four years for the sector? The other one the pharmacy chains, especially Clicks. They’ve really still got a long runway ahead of them in terms of rolling out pharmacies in most countries.
SIMON BROWN: As you’re saying, Clicks, and I’m thinking about their ClubCard – a quick last question: the loyalty programmes we’ve seen from most of the retailers, do they make a seriously marked difference, or is it just more PR and marketing, or can they make a real difference to the bottom line?