admin
The extent to which high interest rates, load shedding and a stagnant economy have hammered consumers is being laid bare in various sales updates from the country’s major retailers.
While all, with the exception of Cashbuild, have reported some growth at the top line, the reality is a little more nuanced.
Stubbornly high inflation means that for grocery retailers, growth of at least 10 percent ought to be ‘baked in’. After all, prices are up by somewhere between 9 percent and 10 percent. For clothing retailers, selling price inflation (of imported goods, especially) is even higher – at 12 percent or 13 percent.
Suddenly, reported sales growth of 9 percent doesn’t look that strong!
Pick n Pay’s profit warning last week painted a particularly dire picture – sales in its core Pick n Pay business at home declined by 0,3 percent when comparing the March to mid-July period to last year. Factor in inflation of 9,5 percent (running significantly lower than Stats SA’s food inflation figure of 13,2 percent), and volumes are down by 9,8 percent – practically 10 percent.
Put another way, it is selling fewer items than it did last year.
It appears that elevated levels of load shedding in April and May – where a peak of Stage 5 or Stage 6 was in place for nearly two full months – contributed to subdued consumer demand.
Last year, there was very moderate load shedding during the comparable period, meaning a higher base with stronger consumer demand.
The problems in April have previously been telegraphed by other retailers.
At the end of May, Pepkor said that “trading in April was weak”. Although it says this had improved in May – it would be tough not to – “it is not expected that the operating and consumer environment will improve any time soon”.
Mr Price Group cautioned last week that nominal (3,8 percent) and real (-3,3 percent) wage growth has fallen to its “lowest level (outside of recessions) since 1994″.
“These conditions are not favourable for discretionary retail, placing considerable pressure on household disposable income and indebtedness.”
Its headline sales growth in SA – 20,9 percent in its first quarter – is practically all down to the acquisition of Studio 88 in October. Strip that out and you get 0.6%. It didn’t include like-for-like numbers (excluding any new outlets) but it is almost certain this was lower. Moneyweb
Online Reporter