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
Massmart battles one of the worst retail environments yet in SA
13/11/2018 - 14:10
Massmart, which is 51% owned by US giant Walmart, is battling one of the worst retail environments yet it has seen in SA, chair Kuseni Dlamini says.
UK mobile commerce market to nearly double by 2022
13/11/2018 - 08:27
Mobile commerce is set to overtake desktop sales globally by 2023 while the UK’s market is expected to nearly double.
Opportunity and threat in Africa’s growing waste sector
12/11/2018 - 16:34
South Africa faces both an opportunity and threat from the looming deluge of waste that will be generated on the continent. If recent projections prove to be correct, Africa’s municipal solid waste by 2025 will be nearly double the 2012 levels.
Threat of US menthol cigarette ban knocks BAT down 11%
12/11/2018 - 13:39
British American Tobacco’s (BAT) share price plunged 11% to R555, wiping R176bn off its market capitalisation, on a report the US government is considering banning menthol cigarettes.
Retail technology - changing buying and delivery methods
12/11/2018 - 11:31
The retail industry has undergone a massive transformation with the advent of technology. Beyond the rapid rise of online shopping, retailers are spying innovative ways to hang on to traditional shoppers while diversifying both their channels and their wares.