SIMON BROWN: I’m chatting now with Chantal Marx, head of research at FNB Wealth and Investment. Chantal, I appreciate your early morning time. We are seeing updates from most of the listed stocks in terms of the impact of last week’s rioting and looting, violence, burning and so it went on. My sense of it is that certainly in the retail space there’ve been impacts, but it looks like they’re going to be up and running fairly quickly. It’s not going to have a material impact on sales and perhaps profitability.
CHANTAL MARX: Yes. So far from the major retailers, we’ve had 1 692 stores impacted. That sounds like a whole lot, but in the context of the listed retail space, it’s about 8% of total SA footprint and 6% of their global footprint, so for them, it’s quite small. Firstly, in the last trading days, I think we’ll probably have the largest impact, but it’s only about a week to two weeks in most instances. I think there you’re going to have some of the larger grocers most impacted, just because some of the malls in which they operate and strip malls in which they operate remain closed.
But … consider that most of that stock will be covered by insurers – thank goodness for Sasria. I didn’t know them a week ago, now I want to know them forever. Most of that stock that is lost is going to be covered. And even in the case where there has been damage to distribution centres, most of these companies have alternative plans in place and business-continuity plans and they can finally use them.
So it seems as if it won’t be as big, and it might not even impact on dividends at the end of the day.
SIMON BROWN: I think it was Pick n Pay which was stocking some of their KZN stores out of Gauteng distribution centres. We have top retailers in South Africa. We absolutely do. And in a sense, they’ve proved it from a logistical perspective. I take your point there in terms of this being crisis management, and so far they are managing it fairly well, all considered.
CHANTAL MARX: Yes. One of the really cool things that I saw yesterday in the news was that during Covid-19 with the hard lockdown Shoprite actually developed this USave container model, where they could bring USave closer to the people. It has actually worked out quite well in this instance, where some of these stores are closed and might be closed for longer than anticipated. They can push through a container or a truck and still service those communities – and of course, they’re not losing turnover.
SIMON BROWN: Yes, they’re not losing turnover. The other story that came out yesterday – confirmation of Mr Price buying Yuppiechef. Not a big deal in Mr Price’s life, but I’ve used Yuppiechef. I quite like the platform. It makes sense for a deal. I suppose it’s just Mr Price doing a bolt-on to boost their sort of more niche, higher-end product range.
CHANTAL MARX: Yes. Mr Price has been doing quite a few bolt-on acquisitions. So, in the value segment that competes with a Pep and Ackermans and Jet they’ve acquired Power Fashion. This one is kind of their higher-end, bolt-on acquisition, which is focused more, of course, on homeware. That is also an area of the market that is growing quite quickly along with paint, hardware and DIY stuff, just because people are now kitting out their homes to be there a little bit more. In a post-Covid world, we are going to see a lot more people working from home and being around the home. You then want that fancy kettle, and you want that nice blender because you are stuck there all day.
SIMON BROWN: Yes. I’m stuck at home all day, every day. Chantal Marx, head of research at FNB Wealth and Investment, I appreciate the early morning.
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