Go buy a treadmill

24-JAN-14

Holdsport, one of our preferred smaller retailers released a sales update for the 4 months ending 31 December.


"Holdsport shareholders are advised that total sales for the four months ended December 2013 ('the period') increased by 1.8% compared to the corresponding period last year. Retail sales increased by 2.8% with sales for comparable stores increasing by 0.8% over the period."


This is certainly not inspiring. Divisionally Sportsmans Warehouse grew sales by 3.6%, Outdoor Warehouse grew sales by 0.5% and their performance brands (Cape Storm and First Ascent) actually decreased by 2%.


So what's the problem here? Well inflation caused price increases of 6.9% which clearly had an impact on the consumer who was a bit tight on cash. In fact this means that volumes were actually down. It is certainly a discretionary spend and unfortunately that has to take a back seat when times are tough.


I am sticking to my thesis here. People love sport and I am pretty sure the majority of New Year's resolutions out there were to get fit, no matter whom you are or where you are from. The awareness of fitness and a healthy lifestyle is increasing. I think this is a great buying opportunity, yes the Rand has had a big impact on this company, they import a lot of their goods, but the stock is still cheap and reflects those challenges.


They're expected to make R3.50 this year. They trade at R41 which puts them on a PE of 11.7. When you are building a portfolio you need stocks like this. Yes you may hold Sasol and Richemont which benefit from a weak Rand but I do believe at some stage the currency will turn. I don't know when but it will as investors realise that there are still billions of people in developing markets who are waiting to become middle class consumers.


Those very consumers in South Africa will eat too much and have to burn those calories by getting active. I am happy to add to this stock at these levels. And if you haven't started your New Year's resolution yet, pop into Sportsmans and buy a pair of Nike's. Or even better go all out and buy a treadmill.