The results highlight local retailers' growing concern over the slowdown in consumers spending amid rising utility costs and debt pressures.
Derek Engelbrecht‚ Retail and Consumer Products Sector leader at Ernst & Young said there were some mixed fortunes within the retail sector.
"Clothing and footwear sales volumes remained sturdy‚ but sales of furniture and household appliances and non-durable goods such as food‚ beverages‚ tobacco products and cosmetics disappointed during the second quarter‚" he said.
Official retail sales data released by Statistics South Africa shows that the growth in total retail sales volumes slumped from 5.3% year on year (y-o-y) during the third quarter of 2012 to 2.4% y-o-y in the fourth quarter of 2012‚ but improved slightly to 3.0% y-o-y during the first quarter of 2013.
The fact that the Easter weekend‚ the second most important trading period after Christmas for many retailers‚ mainly fell in March this year‚ as opposed to April in all likelihood contributed to the slight improvement in retail sales growth during the first quarter of the year relative to the fourth quarter of last year.
According to Engelbrecht‚ the deterioration in retail sales growth since mid-2012 can in all likelihood be ascribed to a slowdown in real income growth on the back of poor job creation and rising inflation‚ coupled with a deceleration in the pace of unsecured lending and a substantial drop in consumer confidence levels.
During the first quarter of the year‚ the FNB/BER consumer confidence index slumped to a 9-year low of -7 index points‚ from +5 in the first quarter of 2012‚ with consumers turning particularly pessimistic about the appropriateness of the present time to buy durable goods.
Apart from the moderation in income growth and household credit extension‚ increasing levels of social unrest and the concomitant deterioration in the outlook for the South African economy‚ as well as higher prices for imported durable goods on the back of a sharp depreciation in the rand exchange rate are in all likelihood persuading many consumers to postpone their durable goods purchases.
"Non-durable goods sales volumes‚ in turn‚ are being waylaid by muted employment growth and higher prices for essentials such as food‚ transport and electricity‚" Engelbrecht said.
Despite the 73c decline in the petrol price in May 2013‚ the price of petrol was 21% higher on average during April/May this year compared to January last year.
The survey also found that retailer confidence levels deteriorated further during the second quarter. The percentage of retailers reporting that they are satisfied with prevailing business conditions fell from 50 % in the first quarter to 41% in the second quarter‚ mainly due to weak sales growth and low profitability levels among durable and non-durable goods retailers.
"While the findings from the survey suggest that trading conditions remained challenging in the retail sector‚ the results could have been worse. We did not see an involuntary build-up of stocks in the retail sector that is typically indicative of a sharp or unexpected deterioration in consumer demand. In fact‚ most retailers indicated that sales volumes grew in line with their earlier expectations and did not slow substantially from the 3% y-o-y recorded during the first quarter. Furthermore‚ most retailers anticipate a slight improvement in trading conditions during the third quarter‚" Engelbrecht said.
Another striking feature of the latest survey results is the fact that‚ despite a dramatic depreciation in the rand exchange rate in recent months‚ survey respondents reported that the rate of increase in their input costs eased for the second consecutive quarter.
According to Engelbrecht, this alleviated some of the downward pressure on profitability‚ as retailers continued to hike their selling prices at a sturdy pace.
Most retailers though‚ expect lower increases in their selling prices during the third quarter‚ which will bring some welcome respite for consumers.
"Whereas the growth in household consumption expenditure was the mainstay behind the domestic economic recovery since the recession‚ the growth in consumer spending is expected to be subdued and much less supportive of economic growth during the remainder of 2013. Both real income growth and credit extension are expected to slow further on the back of weak global economic growth and the debilitating impact of seemingly relentless social unrest and industrial action‚ high household debt levels and deteriorating business and consumer confidence levels on the domestic front‚" Engelbrecht said.
Last month‚ Spar Group‚ like rivals Shoprite and Massmart‚ said it saw challenging trading conditions persisting for the remainder of the year.
"We don't see it getting any better. There are some issues that look pretty tricky for the consumer‚" Spar CEO Wayne Hook said.
Similarly‚ Edcon CEO Jürgen Schreiber said in the group's annual report that higher interest rates‚ increased consumer indebtedness‚ rising unemployment‚ strike action‚ a levelling off of social grants and lower consumer confidence could have a material adverse effect on its retail sales and results of operations.
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