Clothing, footwear sales boost retail confidence
Business Live - Mar 16th 2012, 07:45
The first quarter of this year saw improved levels of confidence among retailers, as solid clothing and footwear sales growth bolstered sentiment, the latest Ernst & Young/Bureau for Economic Research survey on Thursday revealed.
Of retailers, 61% said they were satisfied with prevailing business conditions in first quarter of 2012 - an increase from the final quarter of last year's 56%. This was a stark contrast after a slump of below 50 in mid-2011.
According to Derek Engelbrecht, retail and consumer products sector leader at Ernst & Young, this was the third consecutive improvement in the retailer confidence index, and only the second time since 2007 that more than 60% of the retailers surveyed by the BER reported that they were satisfied with conditions in the sector.
Retailers in semi-durable goods (e.g. textiles, clothing, footwear, toys and CD's) saw the highest volume growth during the surveyed period.
This is in line with data from Statistics SA which showed textiles, clothing and footwear sales volumes increased by a remarkable 10.4% year on year (y/y) during the fourth quarter of 2011, with only the durable goods category (hardware, paint & glass and furniture & household appliances) recording higher volume growth in the first quarter of 2012.
"Boosted by very low interest rates and an uptick in credit growth, as well as solid job creation during the second half of 2011, semi-durable goods sales volumes remained strong during the first quarter of 2012," said Engelbrecht.
Apart from impressive volume growth, the profitability levels of clothing retailers are also being boosted by higher selling prices, which means clothing retailers have seen double-digit turnover growth.
Engelbrecht pointed out that the lagged impact of extraordinarily high cotton prices in the first half of 2011, rising wages and a weaker rand exchange rate had led to substantial increases in purchasing prices, but resilient consumer demand had also allowed clothing retailers to pass cost increases through to consumers in the form of higher selling prices.
The majority of semi-durable goods retailers surveyed by the BER remained confident about the outlook for the second quarter, although they did expect volume growth to ease somewhat.
Last month, fashion retailer Truworths (TRU) said retail sales for the first eight weeks of its second half increased by 11.1% over the corresponding period in 2011.
CEO Michael Mark said generally subdued economic growth was expected for the remainder of the 2012 financial period.
Looking ahead, Stanlib economist Kevin Lings said retail activity was likely to face increasing strain in 2012.
"This is due to a range of cost-push factors that are systematically eroding the household sector's retail spending power," he said.
In contrast to semi-durable goods retailers, retailers in non-durable goods (e.g. food, beverages, tobacco, cosmetics and pharmaceuticals) and particularly in durable goods (furniture, household appliances and electronic goods) reported that the growth in their sales volumes slowed during the first quarter of 2012, the Ernst & Young/BER survey said.
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