Retail industry 'has growth potential'

Stretched consumers with reduced disposable income are not unique to SA's retail sector, says Raam Ratnam, S&P Global Rating's senior director for corporate ratings for retail companies. But pressure on credit spend is a significant local risk.

By Colleen Goko

7 Oct 2016

Ratnam said on Tuesday that despite the drawbacks in the sector, there were still plenty of opportunities for retail in SA.

"There has been an influx of foreign competitors coming to SA, especially in apparel, but there is scope for more penetration. A market such as the US is one we would consider to be extremely competitive, with certain segments perhaps even over-retailed," Ratnam said.

S&P publicly rates more than 50 retailers across Europe, Russia and Africa. Edcon is the only retailer publicly rated in SA.

Ratnam said ratings significantly increased the level of transparency and comparability. Some investors had mandates to invest only into assets with certain rating thresholds, such as investment grade.

"Ratings are also constantly surveilled to reflect developments in a company. The analysts who look at the companies are often in frequent contact with them," Ratnam said.

Global trends in the retail sector included the migration from physical stores to online and a renewed focus on managing space efficiently.

Competition levels were also rising, Ratnam said, as the line between premium and discount retailers blurred.

"Retail can be a bellwether sector," he added. "It can inform us on the bigger picture in a country. We can start by asking what's happening in retail? It's such a good barometer for the economy." he said.

Source: Business Day

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