NEWS ANALYSIS | Simple strategies drive retail success, analyst says

The retail sector is entering 2026 on more stable footing than the past two years, but the sector remains tough and unforgiving.

According to MP9 Asset Management chief investment officer Aheesh Singh, last year showed that simple, low-cost retailers with scale are winning, while turnaround stories remain a high risk.

Singh’s analysis of the sector suggests that stability does not mean easy. He said retailers that perform best are those that keep prices low, manage stock tightly and run disciplined operations.

“The main lesson from last year is that simplicity wins. Discounters that kept pricing competitive and turned stock quickly outperformed,” he said.

After years of pressure from high interest rates, load-shedding and weak consumer spending, conditions are starting to improve. Singh said the recent interest rate cut is expected to ease pressure on household finances, giving consumers a little more room to spend.

The sharp decline in load-shedding is reducing operating costs for retailers, especially those with large store networks, he said.

“[This] is one of the few cost levers that improves profitability without relying on higher consumer demand.”

Despite these improvements, Singh warned that not all retailers will benefit equally. The gap between strong and weak operators is widening and 2026 is likely to reward only those with the right business models.

Main challenges

The main challenges facing retailers this year are inventory management and operating efficiency. Businesses that order too much stock or fail to sell it quickly risk heavy discounting, which hurts margins and cash flow.

This sentiment is also echoed in Trade Intelligence’s latest analysis. The researcher said that the fast-moving consumer goods (FMCG) price war is reaching its limits, as years of heavy discounting and promotions are starting to hurt profit without guaranteeing customer loyalty. While some retailers still rely on specials to attract cash-strapped shoppers, others say constant promotions are no longer sustainable, squeezing margins for retailers and manufacturers.

According to Singh, there is also growing caution about turnaround stories, especially in mid-tier and discretionary retail. These businesses often rely on consumer confidence improving quickly, something that remains uncertain.

Singh said turnarounds take time and the sector is less forgiving than it used to be.

Pick n Pay’s ongoing strategic reset highlights this risk. While there are signs of progress, Singh said recovery remains long and uncertain, and success depends heavily on execution and consumer conditions.

Pick n Pay has been in a multiyear turnaround since late 2023 after losing billions, which exposed the failure of its Ekuseni strategy and left the group burdened by debt and complexity. The retailer has since closed or fixed unprofitable stores, restructured its balance sheet, cut costs and refocused on its core supermarket and franchise businesses, while backing growth engine Boxer.

Progress is emerging, with market share stabilising, like-for-like sales turning positive, losses narrowing and customer numbers rising, though the group has said that a return to full profitability will take more time.

“Pick n Pay’s strategic reset highlights another reality. Weak operators become restructuring stories in a sector that is far less forgiving than it used to be. While there are green shoots in the turnaround, recovery remains long and uncertain, especially if consumer health comes under further pressure,” he said.

In contrast, investors are increasingly favouring large retailers with scale, price leadership and strategic flexibility.

Shoprite remains a standout in this group, said Singh, who described it as a stalwart of South African retail, with strong execution, a dominant food business and growing side operations that help keep customers within its ecosystem.

Boxer is another clear beneficiary of trends. The retailer focuses strongly on price leadership and runs a simple, low-cost model. It benefits directly from food and essential spending and continues to gain market share through controlled expansion, Singh said.

Pepkor also offers compelling long-term prospects, particularly in the value segment, in which consumer demand remains strongest. He said the group continues to grow through new stores and acquisitions while expanding its financial services offering.

In the 2025 financial year, Pepkor strengthened its position as the largest retail footprint, surpassing 6,000 stores, through strategic acquisitions, organic growth and a push into fintech. The moves included acquiring adultwear brands Legit, Swagga and Style and entering the off-price segment with Choice Clothing.

Its fintech and financial services platforms also expanded rapidly, with more than 2-million FoneYam customers, a 40% growth in retail credit accounts and regulatory approval for a banking presence. Pepkor added 168 stores organically, launched new brands such as Ayana and grew online sales, helping drive a 12% rise in group revenue to R95.3bn.

The group is embroiled in a competition dispute over its intention to acquire Shoprite’s furniture business of about 400 stores.

Pharmacy retail remains defensive, but Singh said due to rising competition and valuations investors should be selective.