Advertise with

The JSE’s general retail index has posted its worst rolling three-month period since the end of 2013.
The JSE’s general retail index has posted its worst rolling three-month period since the end of 2013.

Higher taxes take a toll as retail index slumps to a three-month low


By Karl Gernetzky - Jun 21st, 08:53

The JSE’s general retail index, which includes the likes of Woolworths and Mr Price, has posted its worst rolling three-month period since the end of 2013, as depressed consumer confidence and a brewing US-China trade war ruin projections of a significant uptick in consumer spending. 

Since higher taxes and the VAT increase took effect at the beginning of April, the JSE’s general retail index has lost 20%, more than twice that of banks, weighed down by a weaker rand and pressure on emerging market equities.

The rand has depreciated about 15% over the same period, also under pressure from tightening global monetary policy.

Analysts maintain recent disappointing economic data have underscored that consumer activity is not picking up as fast as previously hoped. Although there may be some improvement, the sector is far less rosy than it appeared in January. Since the beginning of 2018 general retailers have lost 13% and food and drug retailers about 19%, compared with the all share’s 5.46% loss.

Most listed retailers were operating on very high price-to-earnings multiples, and the market expectation was that they would experience robust growth in 2018, said Sasfin Securities senior portfolio manager Nesan Nair.

These expectations were based on the confidence boost resulting from the outcome of the ANC’s elective conference in December, but among other factors, recent data and a rising oil price had put a dent in sentiment, he said.

Although some of the underperformance by retailers was self-inflicted, a significant amount resulted from the sell-off in emerging market assets, said Argon Asset Management equity analyst Bjorn Samuels.

Company reports, as well as interactions with management, also pointed to generally poor trading conditions, including low volumes despite product deflation, he said.

Statistics SA said earlier in June that retail sales grew 0.5% in April, well below consensus expectations of a 4.5% rise on an annualised basis.

This slowdown was broad-based and not attributable to prices, analysts said, as retail inflation slowed to 1.7% in the period, well below the overall rate of consumer inflation.

The delayed increase in government salaries could boost retail to the middle of 2018, but the sector was likely to struggle to gain momentum in coming months, said Stanlib chief economist Kevin Lings.
Business Day 

Related News

Clicks CEO to retire after 13 years at the helm
21/09/2018 - 10:36
Clicks Group CEO David Kneale is retiring after 13 years at the helm of the retail and healthcare group.

Overcoming financial planning challenges in retail
21/09/2018 - 09:47
South African retailers face numerous macroeconomic, socio-economic, political, and operational challenges. In a world where finance departments are driving to be business partners inside the organisation, the ability to facilitate relevant operational and financial plans is as necessary as having products on the shelf.

Tesco unveils new discount chain Jack’s
20/09/2018 - 14:08
British supermarket group Tesco has thrown down the gauntlet to German discounters Aldi and Lidl by launching what it says will be the cheapest store in town – Jack’s.

SA consumers taking full advantage of retail reward programmes
20/09/2018 - 11:19
Consumers have saved billions of rand in offered loyalty programme rewards and are increasingly taking advantage of reward points as the country’s tough economic climate impacts on consumer goods such as fuel, electricity and food.

Personalised customer experience enhances in-store value
20/09/2018 - 10:47
Being able to effectively utilise the data at the disposal of South African retailers - using sophisticated technology - will be fundamental to remaining competitive with personalised in-store customer experiences.