Market watchers, take note. After last year's stormy trading for retailers nationwide - during which the weaker members of the sector struggled to stay afloat - there's little doubt as to which companies in the sector are worth investing in. It's not that 2001 was so much worse than 2000, though credit retailers felt the added difficulty of troubles in the microlending industry. But yet another year of poor trading conditions was more than most companies could take.
Groups that had started to spring leaks in the difficult years, or whose existing problems worsened at the turn of the century - Profurn, Fashion Africa, RAG, Sweets From Heaven and Homechoice, to name a few - moved ominously closer to the edge.
The exception was McCarthy Retail: CE Brand Pretorius chose a tough time to turn a company in crisis around, but seems to be doing just that.
Questions were asked even of traditional leaders such as New Clicks and JD Group, though at the time of writing it seems both will, in time, recover .
In terms of returns and profit growth it was only Pick 'n Pay, Truworths and - perhaps surprisingly - up-market furniture retailer Wetherlys that really showed their worth to shareholders (see table).
Any company that was able to perform well in yet another difficult year is surely worth a close look. But (at the time of writing, anyway) the ratings of some better retail stocks have fallen further than is warranted.
Don't just look at old favourites such as Pick 'n Pay as potential investments. That company now boasts a 40%+ market share, depending on how you measure it. A more solid company is hard to find. But it's not cheap and it must find new niches if it is to continue to outgrow the economy.
Pick 'n Pay MD Sean Summers says retailers walk a fine line between profits and sales. "Yes, we continue to squeeze margins because that's one way to get more business. But if we can squeeze double-digit top-line growth out of this market in 2002, we will be happy."
There may be better value in some of the sector's other members, including Truworths.
Not that the sector is in for a better year in 2002. Retail's problems stem largely from factors outside the companies: low economic growth in SA and, in 2001, in the world's leading economies; high unemployment and retrenchments; and wealthier people leaving SA.
The fall in interest rates in end-2000 and early 2001 should have helped retailers, but was outweighed by the above factors.
And last year the microlending industry was disrupted as the result of poor regulation. This affected many lenders and, ultimately, also retailers of bigger-ticket items - such as the credit furniture retailers and appliance groups - which target SA's poor.
It's not a bad thing that poor management and inadequate controls have been shown up in companies such as Sweets From Heaven, Homechoice, Profurn and Amlac. These accidents waiting to happen have done the stock exchange's credibility no good.
Homechoice was well into the red in its results for the year to end-December 2002, with management arguing that the mass consumer market had been hit by excessive credit extension, pushing up arrears. A profit warning, released earlier, stated that the directors had increased the provision for doubtful debts because of negative trends in the mass consumer market debtors books.
Amlac's story is worse. Late last year the Financial Services Board referred a price manipulation probe regarding the paint and oil distribution retailer to the National Directorate of Public Prosecutions. This follows a string of problems too complicated to deal with here.
The year 2001 will be remembered by the more sceptical market watchers with a wry smile as the year in which the Receiver finally caught up with value added tax (Vat) fraudsters and the companies that - unawares, it seems - used these crooked suppliers of consumer goods. How the retailers were unaware of Vat fraud remains a mystery. Metcash, among other retailers, will know that retail is a margins business. Precise knowledge of likely trading margins of particular products makes a strong retailer.
The clothing retailers continued to chug along in 2001, performing satisfactorily but not generating numbers remarkably above inflation, with perhaps some cost savings widening operating margins slightly. That was nothing to scoff at: many consumers were forced to cut back on "luxury" purchases and with the depreciation of the rand forcing food and petrol prices upwards, results for 2002 are unlikely to be much better.
Of the fashionwear companies, Edgars Consolidated disappointed as shoppers - confused perhaps by the group's strategy shift - went elsewhere and cell-phone-related sales tapered. Foschini won some useful cost savings and the share was supported by the Lewis family, which once controlled the group, and fund managers Allan Gray. Mr Price continued to grow its top line but felt the effects of its credit chains, some bad buying decisions and the tightening of shoppers' purse-strings. Truworths, which has found a loyal consumer base for its fashion niche, did fairly well . Fashion Africa continues to struggle, apparently waiting for a competitor to take it off McCarthy's hands. And Woolies recovered slightly after a poor few years but still seems to lack direction.
One of the smaller companies in the retail sector, Africa Glass, stood out again for its sound management, controlled growth, credible (and lucrative) export drive and great prospects. This group has produced strong growth ever since it first started winning awards as an unlisted company. Actually, it isn't a retail company at all but a manufacturer - or a "value adder". That is, Africa Glass uses the ready-made product to generate value-added glass products such as aluminium-framed window parts or shower panels and car windows for retailers at home and abroad.
Italtile and Tile Afrika are two more smallish companies that continue to produce impressive numbers on a well-managed working capital foundation. Not that small anymore, though: Italtile's market capitalisation was R732m at the time of writing and Tile Afrika's R108m.