SA Apparel Retail | Earnings preview | Dressed to weather the storm

The apparel retail environment has become increasingly challenging. The systemic shift of power from the retailer to the consumer has become evident in the growth and operating margins of retailers. Poor execution is penalised (MRP, TRU) and understanding the consumer has become key to success (WHL, TFG). The intense competition, consumers' demand for newness and the digital sales are contributing to the pressure.

Locally, the weak macro has affected apparel retailers' performance. The outlook remains negative due to poor sentiment, pressure on the disposable income, a depreciating ZAR, job losses and the lowest wage growth in a decade. We believe retailers will face pressure from Black Friday discounting and reduced spend available for Christmas sales.

In this note, we provide a preview for MRP and TFG's upcoming H1'20 results. We also provide an update on the SA apparel market, levels of discounting and recent events.