I’m trying something new for this earnings season. Instead of delivering one absolute monster of a Ghost Bites each day, I want to try break them up into more manageable servings. In this edition, I’ve grouped together all the consumer stock updates from 30th July (along with some nibbles).
In this edition of Ghost Bites:
- AB InBev has been lucrative for investors this year
- AVI: thank goodness for the fish
- British American Tobacco’s first half performance met expectations
- Woolworths: even business class shoppers have taken a knock
AB InBev has been lucrative for investors this year (JSE: ANH)
Drinking patterns have shifted, but there are still growth engines here
The pandemic legacy lives on: AB InBev’s best international growth story remains the Corona brand, up 17% in the second quarter. When you consider that the rest of the “megabrands” could only manage 6.2%, it really is incredible to see the multi-year impact of a pandemic emerging with the same name as a beer.
People are still ordering things that look like beers and quack like beers, but aren’t in fact beers. No-alcohol beer sales were up 27% in the second quarter, while “Beyond Beer” (the ESG consultants have been here) increased by 44% in the second quarter.
If you’re keen to understand more about the alcohol sector and the recent stats around Gen Z consumers, then check out this 5-minute excerpt from a recent Magic Markets podcast with the team from Aylett & Co:
Looking at the bigger picture, group revenue was up 5.6% in the second quarter, driven by price growth of 4.2% and volumes growth of 0.9%. Normalised EBITDA increased by 5.8%, with margins expanding by 4 basis points to 35.6%.
For the six months, revenue climbed by 5.7% and normalised EBITDA was up 5.6%. Over that period, margin contracted by 5 basis points to 35.6%.
Underlying earnings per share increased by a substantial 23.4% for the second quarter. It was up 22.1% for the first half of the year. And get this: HEPS jumped by 65%!
This immediately tells you that there’s a lot of leverage sitting below the EBITDA line. Sure enough, net debt to EBITDA is sitting at 2.86x. That’s a healthy balance sheet, but certainly not a low-risk one. At least this is considerably lower than the 3.27x we saw in June 2025.
For the full year, they expect EBITDA to grow in line with the medium-term outlook of between 4% and 8%.
Ghost Bite: The share price is up 31% year-to-date. At a time when most consumer stocks have been on fire, AB InBev has been a safe place for investors. Punters will happily drink to that.
AVI: thank goodness for the fish (JSE: AVI)
It wasn’t a happy finish to the year for this FMCG group
AVI brings us more data points from the consumer economy. They’ve released a voluntary trading statement for the year ended June 2026, and with the exception of the fish, I’m afraid that there isn’t much good news here.
AVI’s final quarter challenges were less about the conflict in Iran and more about distributors and wholesale customers holding back out of fear for the 30 June national protest action. That’s interesting, but the numbers here suggest that general consumer affordability played a big role in the second half.
Revenue for the full year was up by just 1.4%, a very different story to the 4.9% growth achieved in the first half. The silver lining is that AVI has pulled off the usual trick of turning water into wine, with selling and administrative expenses down by 3.2%. This does wonders for operating profit margin.
The Food & Beverage segment is the one to watch, as this contributes 84% of group revenue. After growing by 6.0% in the first half, it’s a pretty bleak outcome to see that they finished at 1.7% for the year.
Entyce Beverages also struggled, with growth of 4.5% at the halfway mark being obliterated by a weak second half. Growth declined by 2.5% for the year, so that’s a really ugly swing thanks to aggressive competition in the creamer category. This is the one area where AVI has been unable to protect operating profit margin due to pressure on selling prices.
Snackworks increased 5.9% in the first half and only 1.9% for the full year. Biscuits did well, but the maize and potato snack categories suffered lower profits. Still, margins were up.
I&J bucked the trend in more ways than one. It was by far the best growth story, up 10.2% for the year. It also saw improved momentum over the period, as growth at the halfway mark was 9.4%. But even on this rainbow, we find a blemish in the form of the abalone business and ongoing challenges in profitability. As is so often the case, a basic hake and chips is best.
We then reach the businesses that AVI really shouldn’t still own.
The first is Footwear & Apparel, where growth of 3.4% in the first half moderated to 2.1% for the full year. Supply chain issues have improved vs. the prior year. The costs of closing Green Cross in the prior year didn’t recur in this period. Footwear sales were impacted by what AVI describes as “widespread deep discounting by big-box apparel retailers”. In other words: competition is rough out there.
Finally, we get to Personal Care, the smallest segment and also the worst strategic fit in the group. Sales fell by 7.2% in the first half of the year. For the full year, they were down 5.1% – this means that the second half wasn’t as bad as the first half. The body spray market is the primary focus here. Apparently, smelling decent by 10am in the morning is a very competitive space as well.
Chuck this all in the pot with the added spice of a decrease in net finance costs for the year (thanks to lower borrowings) and you’ll arrive at an expected HEPS increase of between 4% and 6% for the year. This is despite the number of shares in issue increasing by 0.6% due to incentive programmes.
Ghost Bite: AVI’s share price is down 14.6% year-to-date. The current share price of R90.11 is very close to the 52-week low of R88.97.
British American Tobacco’s first half performance met expectations (JSE: BTI)
They believe they are on track for full-year guidance
British American Tobacco, the company with the most creative ESG team in the world, has met expectations for the first half of the year and feels confident about the full year. Their so-called “Smokeless products” are almost a fifth of group revenue these days!
They also have a segment called Modern Oral. As you are no doubt wondering, this includes products like Velo Plus.
Thankfully for our species, this company remains a low-single digit growth story. The idea is to then eke out some margin gains and plow cash into share buybacks.
Revenue was up 1.4% as reported, or 2.9% in constant currency. The US led the way with 8.5% growth, possibly as a coping mechanism based on their political climate.
Reported profit from operations fell by 15.8%, but that’s because of a credit in the prior year related to the Canadian settlement provision. Adjusted profit from operations was up 3.5%, with adjusted margin up 30 basis points at 43.7%.
Reported diluted earnings per share fell 28.6%. On an adjusted basis, it was up 7.9%. This takes their adjusted margin towards the middle of the 5% to 8% guidance range.
Ghost Bite: The total return over the past year is 12.1%. AB InBev (JSE: ANH) – covered above – has delivered 34%. Before you assume that all sinvestors should be reaching for the beer, the situation looks very different over 3 years or 5 years.
Woolworths: even business class shoppers have taken a knock (JSE: WHL)
The conflict in Iran has made this a very dark winter in the clothing sector
In case you were wondering, even Woolies shoppers have been feeling the impact of higher fuel costs. In a trading update for the 52 weeks to 28 June, the company noted that the second half of the year was a “more challenging” operating environment. No kidding!
After turnover and concession sales were up 5.4% in the first half of the year, Woolworths could only manage 3.3% in the second half. This gives them a full-year growth number of 4.3% as reported, or 4.8% in constant currency.
Woolworths South Africa’s slowdown is evident, with growth of 6.8% in the first half vs. 4.1% in the second half. They don’t give a specific number for the fourth quarter, but they do use the words “particular weakness” to describe it. Yikes.
In Woolworths Food, the first half’s 7.0% growth in turnover and concession sales was followed by just 4.4% in the second half. For the full year, growth was 5.7%. On a comparable store basis, they achieved 3.7% for the year (vs. 5.2% in the first half). These are very decent numbers under the circumstances.
Price movement in Woolworths Food was 4.7% for the period (or 3.9% excluding meat). It’s incredible to contrast this to the price deflationary environment at a retailer like Boxer (JSE: BOX), where trolleys are full of staples based on rice and maize. That organic Woolworths ready-to-eat meal knows how to whack your wallet.
Woolies on-demand grew by 19.6%. The online channel now contributes 7.3% to SA Food sales. With most people still wanting to walk around a store while deciding whether to get the economy or business class sourdough, Woolworths responded by growing net trading space by 2.5% on a weighted basis.
Woolworths Fashion, Beauty and Home (FBH) grew turnover and concession sales by 6.2% in the first half, but this plummeted to just 2.6% in the second half. We all need to eat, but we don’t all need new bathroom towels. After comparable store sales were up by a promising 6.4% in the first half, they finished the year at 4.0%.
Gross profit margins in the clothing sector are in serious trouble. Not only was the fourth quarter a particularly rough period, but it also represented the changing of the season. Woolworths has flagged the gross profit margin risks and the need to clear inventory.
At least Home (up 11.7%) and Beauty (up 7.9%) were bright spots. Perhaps we do in fact need new bathroom towels? Just not a gown to wear after that warm shower.
Net trading space declined by 0.7% relative to the prior period, continuing the recent trend that we’ve seen. Online sales contributed 6.3% to total sales. Interestingly, the online sales contribution was down slightly, suggesting some maturity in the penetration rate of online vs. in-store sales.
Here’s another thing to worry about: the Woolworths Financial Services book. It grew by 5.6% year-on-year (slightly ahead of total turnover), but the underlying credit quality took a knock in this macroeconomic environment. The annualised impairment rate increased from 6.1% to 7.0%.
Of course, with gross margin on full-price sales in FBH running at 60% or more, they can lose 7% of the credit book and still be much better off than if they chased those credit sales away.
We now have to deal with the Country Road Group (CRG), which includes the Politix brand that I’ve recently found to be rather excellent. I can almost hear my wife cringing at the thought of me offering fashion advice, but go check it out!
After a promising first half in which CRG sales were up by 2.3% overall and 2.5% on a comparable store basis, the war in Iran quickly dashed any hopes of success in the notorious Australian (and New Zealand) market. Sales in the second half fell by 0.5%, so they ended the year with 1.0% total sales growth and 1.6% on a comparable store basis.
The highlight here is that gross margin increased year-on-year, as they chose to protect margin rather than chase sales at all costs. Notably, Politix was well up on the prior period (#NotFashionAdvice).
Bringing it all together, Woolworths’ adjusted HEPS is expected to increase by between 1.0% and 6.0%. That’s actually a lot better than the interim period’s growth of 0.7%. It’s worth noting that the second half benefitted from share buybacks in the comparable period.
Results are due for release on 2 September 2026. They will make for very interesting reading!
Ghost Bite: We’ve now seen very difficult recent numbers from Cashbuild (JSE: CSB), Mr Price (JSE: MRP) and Woolworths. That covers almost the full LSM spectrum in discretionary consumer spending. TL;DR: it’s not pretty out there.
Supplement these learnings with my latest YouTube video on Boxer and Vodacom:
Nibbles:
- Director dealings:
- An entity linked to the CEO of Salungano Group (JSE: SLG) has bought shares in the company worth R6.6 million.
- Reinet Investments (JSE: RNI) has completed its share buyback programme, having repurchased R1.12 billion in shares. This barely makes any dent at all in their cash balance. The question everyone is asking is: what will they do with the rest of their dragon-worthy pile of treasure?
- Pepkor (JSE: PPH) has moved quickly to squash rumours about a potential personal banking tie-up with Standard Bank (JSE: SBK). The Business Day published an article along these lines, which Pepkor has rebutted strongly. I would hope so – my investment thesis at Pepkor is based on them building a bank on brand new infrastructure that synergises with the rest of their credit offering.
- Southern Palladium (JSE: SDL) has released a quarterly activities report for June 2026. This is still a mining exploration company, so they are all about assumptions and forecasts at the moment. The major push right now is to achieve the final granting of a mining right for the Bengwenyama PGM Project. The fact that the major subsidiary is called Miracle Upon Miracle Investments gives you a strong indication of how much faith is required by those operating in this sector.
- Mantengu (JSE: MTU) announced that the purchaser of the iron beneficiation plant, Numbers Management (Pty) Ltd, has declined to disclose beneficial ownership information. They say that this is for safety reasons.
- Sebata Holdings (JSE: SEB) is going to miss the 31 July 2026 deadline for the release of the annual report for the year ended March 2026. They expect to be ready by 14 August 2026.
