South Africa Apparel & Footwear: No excitement for apparel names, we turn cautious heading into H226

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South Africa Apparel & Footwear: No excitement for apparel names, we turn cautious heading into H226

South Africa Apparel & Footwear

15 July 2026 Citi Research

Outlook heading into second half

Heading into the second half of 2026, we turn more cautious on apparel retailers.

The five stocks under our coverage have delivered an c11% share price decline on

average in the last six months. We think there could be further downsides to share

prices from potential EPS misses and PE compression. We also believe that share

prices for WHL, TRU and TFG are still not factoring consensus downgrades to EPS.

WHL and TRU have not reported on trading and earnings since March. As such, we

think this trading period could be disappointing. For TFG, we think the difficulties

experienced in H2 26 (until March 26) may continue to Sept 26, which is not being

factored into current consensus estimates. The key downside risks to the outlook in

the second half stem from; i) elevated inventory levels that could, with softer than

expected sales growth, lead to increased promotional activity and lower gross

margins from April onwards. Secondly, the status of credit books from recent

results paints a bleak picture for credit retailers augmented by a 25bps rise in

interest rates (potentially further 50bps hike expected in 2026) and 30-70%

increase in fuel costs since April 26. Lastly, we believe sales trends may slow during

the second half driven by poor consumer demand owing to geopolitical news flow

having an impact on consumer confidence and dampening consumer demand,

higher fuel costs, interest rates and weak confidence.

Therefore, we see potential downside risk to consensus EPS for WHL and TRU

heading into their FY 26e results. As a result, we downgrade WHL from Buy to

Neutral.