However, in the gloom were a few glimmers of sunshine from wholly unexpected places. Shoprite's furniture division grew sales by a surprising 11.5% for the six months to December. This outclasses even Lewis, whose 6.8% sales growth to September looks stellar compared with Ellerines and JD Group
Another surprise came from Massmart's building division, which trades in DIY, home improvement and builders' hardware, under the Builders Warehouse, Builders Express and Builders Trade Depot brands. Here sales grew by 4.6% with inflation of 2.7%.
“These are conflicting signals,” says Gryphon Asset Management chief investment officer Abri du Plessis. “It is difficult to see what is happening. We need more information.”
The number of building plans passed has picked up a bit, he says. “Consumers are not buying TVs or hi-fis, and they are not moving house, but they may be starting to invest in their properties.”
But, he cautions, any growth is off a low base. “Massmart has struggled with management and systems in this division. Another possibility is that this is a turnaround candidate.”
It is clear from this crop of trading updates that a rebound in consumer spending is not around the corner. Accounting as it does for 60% of GDP, consumer spending is not going to help drive the economy out of recession. “I am concerned about consumer spend for the next six months,” says Absa Asset Management analyst Chris Gilmour “There used to be an inverse correlation between prime rate and retail sales growth. Prime has been in long-term decline and yet nothing is happening on the consumer front.”
In the six months to December Shoprite increased same-store sales by 6.4%. In the same period the previous year the group grew same-store sales by 22%. But, as Shoprite CEO Whitey Basson observes, “this growth must be seen against internal food inflation that dropped to below 3% in December.”
Mr Price's results also surprised on the downside, says Gilmour. “This is a company that has benefited from consumer downtrading. We have come to expect more from it than the 8.4% growth just announced.” In the December quarter the previous year it grew sales by 15%.
The results of Truworths, though bad, contained a glimmer of hope. Sales grew 10.6% for the six months to December. When considered against internal inflation of 10% they were flat and against same-store sales growth of 3% they were negative. But volumes in the latter part of the period picked up — a trend that could continue into 2010.
Compared with all the other retailers that have released trading updates, Clicks has fared well. The group increased retail sales by 13.4% for the 18 weeks to January. Even when one strips out inflation of 8.9% and additional sales from new stores of 2.5%, real growth of 2% was achieved.
It is against this background that Unisa's Bureau of Market Research forecasts 1.5% growth for formal retail sales in 2010. This is after a decline of 4.8% last year. In the US sales fell 6.2%, the biggest decline in retail activity on record.
The good news, says the executive research director at the Unisa bureau, Deon Tustin, is that “the retail forecast implies that the retail sector will move out of its recessionary conditions on the back of moderating inflation and a fairly low interest-rate environment.”
But 1.5% is pedestrian growth at best.
“All the high-frequency indicators are saying things are improving,” says Gilmour. “Manufacturing increased in November for the first time in 18 months, vehicle sales are improving, inventories are starting to grow. But the economy lost a million jobs last year and they are not being recreated in a hurry.
“Companies have seen that productivity has remained the same or has grown, despite smaller head counts and higher pressure. It's only when companies begin actively rebuilding inventories that they will re-employ. At that point a recovery becomes robust and sustainable. We are not there yet.”
These are not the last of the lacklustre results from SA retailers — they will battle strong headwinds for at least another six months.
Source: Financial Mail
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