In a surprising market twist, struggling retailer Truworths saw its shares rise 5% after reporting flat sales, while strong performer Clicks dropped 6% despite growth figures.
The retail sector in South Africa faced a challenging 2025, with clothing retailers experiencing particularly poor share price performances. Investors are now debating whether 2026 will bring a recovery, as identifying rebound opportunities can yield significant returns. However, timing such recoveries is difficult, influenced by financial data, market sentiment, and external factors. Stock pickers rely on fundamental and technical analysis to navigate these uncertainties.
Market reactions hinge on the gap between expectations and actual results. Even poor outcomes can boost shares if they exceed low expectations, while solid results may disappoint if they fall short of high hopes. This dynamic explains why Truworths, a beleaguered company, outperformed market favorite Clicks in the past week.
Clicks operates an effective model, using pharmacies to draw customers to high-margin front-shop items like health, beauty products, and small appliances. It also runs a wholesale arm supplying independent pharmacies. Despite positive sentiment toward South Africa, including reliable electricity, Clicks shares traded near their 52-week low as of early 2026. The company is seen as defensive rather than a high-growth story, growing roughly in line with inflation but vulnerable to online shopping and intense price competition, especially in its front-shop segment.
Following a trading update, Clicks shares fell 6%, trading at a price-to-earnings ratio of 23 times. Comparable sales grew 3.7% over the 20 weeks ending 11 January 2026, hampered by system issues causing stock shortages in the Western Cape. Margin pressures persisted due to competitive festive trading, with South African consumers hunting bargains, as evidenced by strong Black Friday sales. Analysts do not view Clicks as undervalued, raising risks of further declines.
In contrast, Truworths has lost a third of its value over the past year, dragged down by its African operations. Yet, after announcing flat group sales for the 26 weeks to 28 December 2025, shares closed 5% higher. Headline earnings per share rose between 0% and 2%, aided by improved gross margins in Truworths Africa despite a 3.6% sales drop there. Meanwhile, the UK-based Office segment grew 7.1% in rand terms. Trading at a P/E of 8 times, any stability is seen as progress, though concerns linger over the fragile offshore performance.
