’Twas the nightmare before Christmas

There is only one more weekend before Christmas, but with shopping disrupted by severe power cuts it may be a dismal festive season for retailers, who rely on Christmas spending sprees to fill the coffers.

Most big malls use generators for emergency lighting only. When the power shuts down customers leave in droves, and often don't return when the lights are back on - especially at the big malls.

Christmas trading is the most important period of the year for retailers, accounting for 13.6% of annual clothing sales, 11.6% for food and 9.1% for hardware, according to a report by JP Morgan Cazenove.

"November and December sales taken together would be around 25% of a clothing retailer's annual sales," said Shane Watkins, director of All Weather Capital.

"Foreign shareholders own between 50% and 70% of most SA retailers so the power outages will get international prominence if the effect is material."

Kevin Hedderwick, CEO of Famous Brands, which owns Wimpy, Steers and Debonairs, said when "we lose business because of load-shedding it is lost forever. If you can't buy a meal from one of our restaurants today you don't come back tomorrow and buy two".

Truworths CEO Michael Mark said some days there are up to 80 or 90 of 670 stores in the group that are off-line for a few hours due to power cuts.

"The worst day was [last] Saturday in terms of rands lost because it was one of the last Saturdays before Christmas," Mark said. He estimated that Truworths lost sales in excess of 15% that day, compared to the same day a year ago in those same stores.

"When we have no power we are forced to close the store for security and safety reasons," he said.

Mark said generators were expensive and costly to maintain. "In many stores it would be impractical to run generators, but we are looking at possible solutions if it turns out that regular power cuts are here to stay. There's no simple solution."

Clicks Group CEO David Kneale said the group could not trade during power cuts. However, "unlike food retailers we don't have any wastage as a result of load shedding and we don't incur additional costs for generators or fuel to power the generators".

Two research reports suggest that grocery stores are positioned better than clothing and general merchandisers because most have generators to keep fridges on, while most "discretionary" retailers do not.

JP Morgan said that last weekend a number of supermarkets were only processing cash transactions at some point, as credit-card links failed.

JP Morgan estimated that if stage-two cuts were implemented for half the days this month, 16 shopping hours would be lost, "equating to 5.5% of total December shopping hours".

Renaissance Capital said it was too soon to quantify the negative effect of power cuts on December trade.

Mall-based stores (specifically nonfood retailers) are likely to suffer more as foot count dropped substantially during power cuts, it said. Street-based stores tend to have more natural lighting and are likely to hold up better than those in malls.

"Woolworths, Spar and Pick n Pay have all claimed to have almost 100% generators in their stores due to cold storage and fresh offerings. Also, due to the basic daily need for food products, we find they are likely to be more resilient ... over the festive season than discretionary retailers," the Renaissance report said.

Shopping mall and credit-based discretionary retailers are likely to be the hardest hit. This includes the Foschini Group, Truworths, Clicks and Lewis.

Eskom said on Friday that power cuts would stop over the festive season. But Watkins said that there would be more power cuts in February and March when industry started up again.