The Finance Ghost: The market lowdown on Harmony Gold, and apparel, health and beauty retailers

28 Jan 2024

It may come as a shock to those who have been on the wrong end of gold mines before, but they do sometimes live up to the stereotype.

Harmony Gold is up by more than 80% in the past year, which is rather spectacular. This is thanks to a combination of higher gold prices, great production numbers and improvements in unit costs.

In the six months to 31 December, its gold production increased by between 12% and 14%. All-in sustaining cost per kilogram will be between 12.3% and 14.9% lower. The South African and Papua New Guinea businesses pulled their weight in this period, leading to the great overall outcome.

Management is taking a conservative approach, with full-year guidance unchanged despite the obvious outperformance in the first half. This tells you something about how tricky mining can be.

Pan African Resources also put out decent numbers, with gold production up by 6.7% for the six months to December and all-in sustaining cost coming in 3.7% below guidance. As with Harmony, guidance has been maintained for the full year despite the strong first-half performance.

Clothing retail looks dressed for success — but will it last?

It was an important week for retail updates. It kicked off with Attacq, which gave the market some clues about the performance in its malls over November and December. The first major insight was that Black Friday was relatively weaker this year versus the Christmas period. Much of this seems to be the base effect, as December 2022 was a dark time in our lives — literally. Blackouts were disastrous and retailers suffered for it.

The second important insight was that apparel performed really well, up by 19.4%. Health and beauty grew by 15.4%, whereas restaurants and takeaway joints could only grow by 8.1% and 7.4%, respectively. Though one must be careful in applying the Attacq portfolio insights at the macro level, the retail updates that came out after the Attacq news have proven to be well in line with what the property fund told us.

For example, Clicks achieved its highest daily sales on Friday, 22 December. Retail turnover was up by 11.8% in the 20 weeks to 14 January 2024. It achieved market share gains across all core product categories. Aside from the troubles in the wholesale business, it was a great period for Clicks.

On the apparel side, The Foschini Group (TFG) and Mr Price both released updates that have given their share prices a major boost. TFG increased turnover by 4.5% in the quarter that ended on 30 December. That may not sound impressive (and it isn’t), but there were sections of the update that teased a strong gross margin performance. The market seems to have focused on that, rather than the tepid like-for-like turnover growth in TFG Africa of just 0.7%.

Mr Price grew comparable store sales by 4.1% for the quarter that ended on 30 December. Total group sales were up by 9.9%, helped greatly by new store openings and acquisitions. Much like at TFG, there has been a strong gross margin recovery in this period and the market seemed to like it.

Interestingly, TFG Africa’s online sales grew by a substantial 44.8% thanks to the brands being consolidated under the Bash platform. Mr Price has had no such joy, with online sales only up 2.9%.

It wasn’t all rainbows and roses in this sector. Woolworths had a disappointing story to tell in the fashion, beauty and home departments — one that only looks worse now that TFG and Mr Price have reported. Sales for the 26-week period to 24 December (not directly comparable with the period that TFG and Mr Price reported on, but close enough) grew by just 2.2%. Volumes were sharply negative.

This was a wobble that Woolworths just couldn’t afford. The share price performance has largely been driven by the fashion, beauty and home departments in the past few years, with Woolworths Food in a fight of its own against Shoprite.

If the apparel and health and beauty outcomes have been directionally in line with what Attacq told us, then I would be a bit nervous about the restaurant and quick-service restaurant sector. Remember this day when Famous Brands and Spur release their next sets of numbers.

As a final note, Yuppiechef (part of Mr Price) achieved double-digit sales growth. For the MasterChef fans, inflation be damned! DM

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R29.

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Clothing retail looks dressed for success — but will it last?