Mike Cohen

Bloomberg

WOOLWORTHS Holdings and other South African retailers may report record profits over the next two weeks as millions of newly wealthy black consumers fuel a spending spree sparked by the lowest interest rates in more than two decades.

Woolworths, SA’s fifth-biggest retailer by market value, is likely to report next week that profit before once-off items and goodwill amortisation rose to 92c a share in the 12 months ended June 30, from a restated 76c a year earlier, according to the median estimate of seven analysts surveyed by Thomson Financial.

The Reserve Bank has reduced its key lending rate seven times since June 2003 to 7%, giving consumers more money to spend on food, clothing and household goods. The cuts have coincided with thousands of skilled black workers taking up senior posts in the civil service, state-owned utilities and private companies.

"You have seen the black population spending a lot more on consumer items as they catch up," said Neville Chester, of Cape Town-based Coronation Fund Managers.

Consumer spending has risen because there have been "above-inflation wage increases and the real income of the formally employed has been increasing".

SA’s retail sales are likely to have risen 16% in June from the year-ago period, the Retail Liaison Committee, an industry association, said earlier this month. Clothing and footwear sales rose 18%, and sales of furniture, appliances and television and audio equipment 14%.

Retailers’ share prices have advanced with record earnings. A 12-member general retailers index has gained 70% over the past year, and the FTSE/JSE Africa all share index 46%.

The Cape Town-based company said last month that its annual sales had risen 16%. The retailer, which sells luxury food, clothes and household goods, has said a change in the way it accounts for leases reduced earnings by 2,9c a share.

Woolworths shares have gained 50% in the past year. Distell’s per-share profit rose 25% to 35% in the year ended June 30, the company said on July 27.

Stellenbosch-based Distell earned R1,84 a share the previous year. Truworths International, SA’s third-largest clothing retailer, will report tomorrow earnings for the year ended June 30 .

The company may say earnings before once-of items and goodwill amortisation rose to R1,46 a share from R1,10 a year earlier, according to the median estimate of seven analysts surveyed by Thomson Financial.

Truworths said on July 13 that annual per-share profit rose as much as 33% as sales reached a record R3,29bn.

Grocery chain Shoprite Holdings may report earnings before once-off items and goodwill amortisation rose to R1,18 a share in the year ended June 30, from 80c a year earlier, the median estimate of seven analysts surveyed by Thomson Financial shows.

Sales have risen to R29,8bn in the 53 weeks ended July 3, from R26,6bn in the prior 52-week period, Shoprite said last month.

Shoprite and Massmart, SA’s biggest food wholesaler, are due to report earnings next week.

Massmart is expected to say that before once-off items and goodwill amortisation rose to R3,49 a share in the year ended March 31, from a restated R2,93 a year earlier, according to the median estimate of seven analysts surveyed by Thomson Financial.

Massmart said last month that it expected its full-year sales to increase 12%.