Credit Suisse positive on South African retailers

South African retailers could continue to grow on the back of volume growth and increased consumer spending capacity, Credit Suisse said and began coverage of Truworths, Woolworths and Steinhoff with an "outperform" rating.

The brokerage also initiated coverage of JD Group Ltd, Lewis Group Ltd, Spar Group Ltd and Foschini Group Ltd with an "outperform" rating.

"While job creation is key to consumer sentiment and spend, consumer credit is also being offered to the informal employment market, and this continues to drive demand," Credit Suisse analyst Dean Ginsberg wrote in a note to clients.

Credit Suisse - which named Truworths International Ltd, Foschini, Steinhoff International Holdings Ltd and Woolworths Holdings Ltd its top-picks in the sector - is more positive on clothing than furniture and food retailers.

"Clothing retailers have been the real outperformers over the past three years, on the back of the rollover of bad debts, clothing inflation and rising consumer spend," Ginsberg said.

Given the expectation for a spike in food inflation, the brokerage named Spar its top pick in the food sub-sector as the franchisee operator has been gaining market share over the past few years and seen store base expansion.

In furniture, Credit Suisse named Steinhoff as its top pick due to its significant exposure to offshore markets.

Credit Suisse also said that Massmart Holdings Ltd was well positioned for growth after Wal-Mart Stores Inc recent acquisition of 51 percent stake.

The brokerage set a "neutral" rating on Massmart, Shoprite Holdings Ltd, Pick n Pay Stores Ltd, and Mr Price Group Ltd.

 

JOHANNESBURG, (Reuters)

 

This article was originally posted on Sustainable Development Africa Platform

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