Advertise with fastmoving.co.za
 
 

Grocery retailers have had a tough year, and like other retailers are hoping to see a boost in sales over the festive season.
Grocery retailers have had a tough year, and like other retailers are hoping to see a boost in sales over the festive season.

SA grocery retailers hoping for a merry festive season

RETAILER NEWS

By Larry Claasen - Dec 6th, 08:18

Grocery retailers have had a tough year, and like other retailers are hoping to see a boost in sales over the festive season. 

If they are lucky, they might just replicate their performance of the previous December period. This is despite 2017’s numbers being more robust than spectacular. Revenue for Shoprite’s SA stores was up 7.8% to R57.4bn for the six months to end-December.

There was a similar showing at Spar Group, with the franchise chain increasing revenue by 7% to R33.8bn for the 17 weeks to end-January. For its part, Pick n Pay saw revenue rise a modest 5.3% to R81.6bn for the year to end-February. This rise was more muted considering revenue was up 5.5% for the half-year.

Back then, the retailers did not shoot the lights out, but this is understandable, given that the country was preoccupied with finding out who would replace Jacob Zuma as president of the ANC and eventually the country.

Retailers have found themselves at the mercy of an increasingly difficult economy, with SA consumers taking the brunt of a technical recession, dealing with an increase in the VAT rate and sharp rises in fuel prices. The recent rise in interest rates has not helped.

There are also signs that the credit health of many South Africans is weakening, with the Transunion SA consumer credit index showing a rise in defaults in the second quarter of the year.

The sector’s woes were also reflected by Stats SA, which reported a 0.7% rise in year-on-year retail sales for September.

But just as retailers were preparing for a difficult festive season, the economy started to get the wind from behind. Stats SA says the recession has come to an end and fuel prices are decreasing.

Spar Group CEO Graham O’Connor said in November local sales for his chain remained strong, even after it produced robust numbers for the year to end-September.

Independent analyst Anthony Clark thinks retailers can expect a reasonable festive season, even if the economy remains difficult. “South Africans love Christmas. They will spend even if it gets them into debt.”

Clark pointed out that Spar operates in the upper end of the retail market, so it cannot really be seen as a measure of how the entire sector is doing. He said to get a better understanding of the broader economy, it was best to wait to see the numbers coming from Shoprite’s U-Save and Massmart’s Makro.

Clark is not the only analyst circumspect about the sector’s prospects.

“I am aware of the recession that we’ve escaped. However, this was only a technical one and the economic statistics for the country are still looking dire. SA is on the brink of an economic disaster. Pretty much every state-owned enterprise is in financial disarray and this will cost taxpayers more money to resolve,” said Gryphon research analyst and portfolio manager Casparus Treurnicht.

He said even though the rand fuel price had improved, there were still some questions over whether it was sustainable. “A temporary improvement is pointless when electricity blackouts curtail business sentiment and unemployment remains at all-time highs.”

From Treurnicht’s perspective, the country still has a long way to go until it turns the corner. “We haven’t seen the VAT increase being reversed, or the tax brackets being lowered again. Government is also not able to maintain similar levels of social spending, so I am not convinced that we have turned the corner at all.”

In fact, he thinks there is a good chance of more trouble ahead. “I believe we will be entering a recession again and therefore, I believe the retailers will be treading very carefully over the next year.”
Business Live 

Related News

Aldi opens a record number of stores in one day
07/12/2018 - 09:45
Aldi UK has opened a record eight stores on a single day as part of a tranche of 24 new outlets that are opening throughout November and December.

Business confidence remains flat
06/12/2018 - 13:28
Business confidence remained flat in November.

SA out of recession with 2.2% GDP growth
05/12/2018 - 16:42
The SA economy has officially exited the recession after reporting 2.2% GDP growth for the third quarter of the year, Stats SA announced.

New age consumerism and the consumer power-shift
05/12/2018 - 10:37
Advances in telecommunication technology have transformed the tools used for marketing and consumerism and ultimately, the way that businesses operate. The Statista 2017 Report indicated that the number of smartphone users in the United States is estimated to have reached 224.3 million, with smartphone users worldwide exceeding 2 billion. Undoubtedly, we are running headlong into the end of the industrial era of consumption and into a consumer power-shift.

Driving mobile and card acceptance among informal retailers holds the key to scaling cashless payments in SA
05/12/2018 - 09:57
Despite the majority (77 percent) of adult South Africans owning bank accounts, more than half of the total value of all consumer transactions in the country are still conducted in cash. This suggests that being formally banked may not be enough of an incentive for consumers to move away from cash. Accelerating the pace of migration from cash to digital and card payments must be a priority for catalysing economic growth.