Calendar 2025 was a shocking year for discretionary JSE-listed retailers, most of them clothing, footwear, textiles and leather (CFTL) retailers, with huge price falls evident for former darlings of the sector such as Mr Price (-41%), TFG (-50%) and Truworths (-45%).
However, these large declines mask very different reasons for the poor performance. Considering the steep falls against a backdrop of a gradually improving local economy, it seems reasonable to assume an improvement may be expected in 2026.
For calendar 2025 the JSE retailers index (JS 4041) declined by 25.5%, so Truworths, TFG and Mr Price underperformed their benchmark index by a considerable margin. All other things being equal, in the absence of extraneous factors the market was probably looking for a gradual improvement in this index in 2026, in line with a gradual improvement in the ambient economic conditions.
Truworths’ share price shows a secular decline, starting the year at just more than R100 and finishing at about R55. This is venerable company with a fine pedigree, catering mainly to an upper-market customer base and providing credit to its customers.
It is highly disciplined in its credit-granting procedures but has struggled to achieve decent topline growth in recent years. Only its UK Office subsidiary has shown any real growth recently, and the irony is that this company was allegedly put up for sale by the group a few years ago when it wasn’t performing.
Someone once described Truworths to me as a healthy dinosaur, which means that though the company does most things well operationally, it has become something of an anachronism in today’s highly competitive arena. Its clothing, while well made, durable and fashionable for a certain demographic, obviously doesn’t appeal to the same young, upwardly mobile demographic to which, say, Mr Price appeals.
Mr Price started the year at about R292 and finished at R172, but the major decline was late in the year, when the company announced it had purchased the German affordable retailer NKD Group. Until that point, in early December 2025, Mr Price’s share price had declined by about 28% and earnings growth, while modest, at least appeared sustainable.
However, the market took an instant dislike to the NKD transaction, from a valuation perspective and from the point of view that South African retailers rarely, if ever, manage to get foreign acquisitions right. In addition, analysts don’t like the somewhat opaque financial information from NKD due to its parent company (TDR Capital) being a private equity firm.
Fine pedigree
Ultimately, the market appears to believe the transaction will reduce profitability for the group as a whole. The damage was entirely self-inflicted and will only be removed if management can make a demonstrable success of the NKD acquisition, but that could take some time. Meanwhile, any upward share price movement may be limited.
TFG’s share price decline was entirely due to abysmal interim results in November, especially the interim dividend being slashed by almost 20%. TFG has had a chequered history in recent years, marked by volatility in its performance in South Africa and in its offshore operations. Like Truworths, it has a fine pedigree and is generally well run. It has certain competitive advantages, notably its quick-response manufacturing capability, which neither of its two main competitors has to any degree.
TFG appears to have been hurt most by low-end competition from Far Eastern online retailers such as Shein and Temu, which are operating in South Africa despite the de minimis rules having been tightened. In its interim results presentation it referred to the harmful impact of online gambling on consumer spending. This factor affects all retailers, not only TFG.
In terms of market rating, Mr Price shares, on a price-earnings ratio of 11.2 times, are significantly more highly rated than either TFG (8.9 times) or Truworths (7.5 times). If Mr Price can extract value from its latest acquisition, the premium rating will be justified.
• Gilmour is an investment analyst.
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