Economic fallout pushes major retailers to market for cash

JOHANNESBURG – The economic fallout due to the Covid-19 pandemic is expected to result in further equity injections among listed non-food retailers, while private companies are likely going bust, Meryl Pick, head of research at Old Mutual Equities, warned yesterday. 

Pick said 2020 would go down in history as probably the most challenging year in South Africa for retailers as listed retailers – including The Foschini Group (TFG), Mr Price and Pepcor – planned to raise equity, while Massmart received a R4 billion loan from parent company Walmart to cushion the blow of the pandemic.

“Among the smaller retailers, where they don’t have that option, maybe they are held by private equity players, we may see bankruptcies or more possible deals, like in the case of Jet, barring bankruptcy. 

“We might see the likes of Mr Price expressly raising capital to make opportunistic acquisitions. I am not sure if we’ll see outright bankruptcies, but we may see changes in ownership. We will see ongoing calls for equity injections. Most big listed players have already come to the market so that trend is already in motion,” said Pick.

TFG, the owner of 29  brands, including Foschini, on Monday unveiled plans for 371 Jet stores for R480 million, citing it was a unique opportunity which previously was not possible at an attractive price.