Retail News South Africa

Credit retailers feel pinch

The combination of higher interest rates, consumer debt and factors such as the National Credit Act are taking their toll on businesses... some more than others.

The slew of retailers' financial reports beginning this week is likely to show that some businesses are weathering the slowdown in sales far better than others.

December retail sales were 0.5% down on those for 12 months earlier in constant rands.

And Statistics SA says retail sales for the whole of last year grew by only 5.1% (constant rands), the lowest increase since 2003.

Tony Twine, an economist at Econometrix, pointed out that 9.4% more cash went through the tills this December than in December 2006.

Shoprite releases its interim results tomorrow, Woolworths its interim results on Thursday and Massmart its interim results the following week.

“The food stores are doing a lot better than the furniture stores,” said Twine. “Anybody with low exposure to interest rates is doing better than someone for whom credit is vital to sales.''

Shoprite Holdings' results will show that its African operations have performed well. The group's non-South African business grew by 32.5%, and by 20.2% in like-for-like stores, in the second half of last year.

The group's turnover grew 21.8% to R23.3-billion.

Massmart released its sales update for the six months to December several weeks ago, reporting sales growth of 11.6% — or 5%, allowing for inflation.

Shoprite and Woolworths both released updates showing growth of 16%.

Guy Hayward, chief financial officer of Massmart, said that to get a true picture of how retailers were faring, Stats SA's figures should be adjusted for inflation.

“The National Credit Act and higher interest rates might be affecting credit retailers.”

Source: The Times

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