Black Friday & The Festive Season: Which Retailers Stand to Benefit 👀

It's Black Friday, and the Festive Season is around the corner! Companies are gearing up to replicate the success they experienced during the previous year's shopping frenzy. Among those poised for potential success are Woolworths, Shoprite, and Foschini, each having navigated the challenges of load shedding to varying degrees.

In our latest EasyResearch article, we will be looking at:

• Shoprite: Record market share, saved customers R13.5 billion; overcame load-shedding, increased profits by 9.4%.
• Woolworths: Turnover up 10.8% to R73 billion, 8.3% from online sales; profits before tax rose 9% to R5.4 billion.
• Foschini Group: Robust performance, 12.4% growth; faced challenges, managed costs effectively.
• Black Friday Impact: Shoprite and Woolworths saw significant sales growth, contributing to positive yearly results.

Shoprite Holdings Ltd 

In 2023, Shoprite achieved a record market share, saving customers over R13.5 billion through Xtra Savings. Despite the impact of unprecedented load-shedding, the group increased profits and dividends. Shoprite and Usave saw a 15.6% sales growth, including the successful integration of 92 Massmart stores. The commitment to low prices and affordability continued, with an extended 52-month period of uninterrupted market share gains in South Africa. Profits for the year were up 9.4% to R6.3 billion.

However, the group found itself spending R1.3 billion on powering generators in South Africa, hindering potential higher returns and profit growth.

Looking at how Black Friday previously impacted the Shoprite Group amid inflationary concerns, the group’s sales for the six-month period to 1 January 2023 increased total merchandise sales by 16.8% to approximately R106.3 billion.

By then, the group added that the growth in sales in the South African supermarkets market reflected a record Black Friday and festive season, underpinning 46 months of uninterrupted market share gains.

Woolworths Holdings Limited

Woolworths Group achieved positive results despite economic challenges and power cuts in South Africa in 2023. Turnover and concession sales, excluding David Jones, grew by 10.8% to R73 billion for the year and 9.3% in comparable stores. Online sales contributed 8.3% to the Group's turnover, with a 9.3% growth. In total, including a 9-month contribution from David Jones, the Group's turnover increased by 6.9% from the previous year.

Profits before tax for the year increased by 9% from the previous year to R5.4 billion.

Driven by robust Black Friday and festive season trade, during the 26 weeks ending on December 25, 2022, Woolworths Group experienced an 18.5% increase in turnover and concession sales compared to the same period in 2021. In constant currency terms, the growth was 16.3%. The last six weeks of the period, directly comparable to the prior period, saw a notable 8.8% increase.

The Foschini Group Ltd

The Foschini Group, despite challenging conditions, showed robust operational performance in H1 2024, with a 12.4% growth in retail turnover. Adverse factors included rising interest rates, inflation, and local disruptions. Strategic cost management limited the decline in headline earnings per share to 15.3%, aligning with the lower end of the projected range stated in the September 5 2023 trading statement, where it indicated that the increased frequency and extent of load shedding since December 2022 required significant inventory clearance throughout H1'2024, impacting gross margin but positioning the brands well going into H2'2024.

According to the group, its second-half performance relies heavily on Black Friday and Christmas trade, shaping its overall yearly results. 

Examining past impacts of Black Friday and the festive season on the group, Q3 FY2023 showcased a robust performance, overcoming load-shedding challenges in South Africa. However, affected by load shedding, TFG Africa lost approximately 112,000 trading hours in Q3 FY2023 and around 260,000 trading hours in the first nine months of FY2023, representing 2.4 times and 2.6 times the lost trading hours compared to the previous financial year, respectively.

Conclusion

Investors assessing retail giants such as Shoprite, Woolworths, and The Foschini Group should consider various factors to make informed decisions. Consider the rand/dollar correlation: a weaker rand raises import costs, possibly causing inflation, while a stronger rand may curb inflation by making imports more affordable. Companies may pass on higher costs to consumers.

While Shoprite's impressive market share and profit growth amid load-shedding reveal resilience, the substantial spending on generators raises concerns about the potential impact on returns. Despite achieving positive results, Woolworths faces economic challenges and power cuts, emphasizing the need for strategic planning. The Foschini Group's robust performance in the face of inflation and load shedding highlights the importance of effective cost management.

For all, the historical influence of Black Friday and the festive season on sales underscores the significance of these events in shaping annual outcomes. Investors should carefully weigh these dynamics in the context of inflation's potential impact on consumer behaviour and the operational challenges posed by load shedding. The recent announcement by Eskom of load shedding stage 6 on Black Friday adds a layer of uncertainty, requiring a closer examination of the operational challenges these companies may face.

As the realms of technology, sustainability, and global policy continue to intersect, recent developments in the fields of artificial intelligence (AI), electric vehicles (EVs), and lithium (also referred to as "White Gold"), have been making waves across international markets.

The global economy is shifting towards a green economy, and companies are strategically safeguarding their earnings by embracing sustainable practices.

As countries return to work to ensure food security while working on the energy transition: there are potential opportunities in the electric vehicle (EV), energy supply, and fertilizer sectors.