SA retail sales slide 2.5% y/y

South Africa's retail sales numbers for March have surprised the market, sliding 2.5 per cent year-on-year. This figure was unexpected as market expectations had anticipated a 2.8 per cent jump in retail sales. To delve deeper into these numbers and provide insights into the current market trends, Chris Gilmour, an analyst at Mour Media, joined CNBC Africa for a detailed discussion. Gilmour shed light on various aspects of the retail sector, offering valuable perspectives on consumer behavior and economic conditions. Starting with a discussion on the recent retail sales data, Gilmour highlighted the disparities across different sub-sectors. While clothing, furniture, and household sectors showed strength, food and beverage sectors were relatively weak. Gilmour expressed his views on the challenges faced by the consumer economy, forecasting a continued downward trajectory for retail sales in the upcoming months. Despite the impending bounce in the economy, Gilmour emphasized that consumers would remain under pressure, affecting retail sales. Within the retail space, Gilmour identified furniture and household companies as potential investment options, considering the trend of people investing in home comfort due to the slow vaccination rollout. Particularly, he highlighted the impressive performance of companies like Lewis, which saw a significant increase in sales for furniture and household items. Moving on to the food sector, Gilmour recommended options like Pick n Pay and Shoprite for investors, citing their strategies in catering to the low-end market. He elaborated on the significance of distribution capabilities and consumer preferences while analyzing the potential growth prospects for these companies. Additionally, the conversation shifted towards the recent interest shown by Heineken in acquiring Distell. Gilmour speculated on the motives behind Heineken's interest, suggesting that it might target Distell's distribution network to compete with AB InBev in the premium beer market. He delved into the valuation of Distell, estimating that the true value of the company was significantly higher than the current market price, indicating potential for a premium offer to entice Remgro, the controlling shareholder. Reflecting on the possible acquisition, Gilmour advised investors to hold onto their shares, anticipating further growth in the company's value. He ruled out the possibility of a counter bid from AB InBev and assessed the likelihood of other competitors making a move for Distell. Although a potential bid from another drinks manufacturer like Diageo was not ruled out, Gilmour expressed skepticism towards additional offers. In conclusion, Gilmour's analysis painted a nuanced picture of the South African retail sector, offering strategic insights for investors and highlighting key market trends to watch in the coming months.