Stores try to blunt price hikes

Consumers are stuck between a till and a hard place - so much so that retailers are careful not to let higher prices affect South Africans' wallets.

July's consumer inflation clocked in at 6.3%, according to a release by Statistics SA yesterday.

Though this is lower than the previous month's 6.6%, it is still above the Reserve Bank's target of between 3% and 6%. But food prices have been rising at more than 8% for three consecutive months.

Retail sales numbers released earlier this month showed that consumer spending failed to keep up with inflation in many categories, meaning that the uptick in the figures simply showed consumers are paying a little more but getting a little less.

Retail sales were unchanged in real terms from a year ago, showed June's numbers.

Shoprite's full year results, released earlier this week, also gave some clues that the supermarket chain was absorbing some of the price increases because consumers are probably too fragile to bear the full inflationary brunt.

Shoprite opened 86 new supermarkets - and closed 10 - in South Africa in the past financial year. This helped it to grow turnover by 8.7% but its trading profit in the country was only 5.3% higher. High levels of indebtedness - and the cost of servicing that debt - has squeezed consumers over the past year.

A trading update from Massmart showed yesterday that the owner of Makro, Game, DionWired and Cambridge Food has also had a tough six months. The group said its earnings would be between 23% and 31% lower than a year ago.

Massmart's share price dropped by 8.6% after the news. The company's half year results will be announced next week.

Shoprite shares dropped by more than 6% after it released results on Tuesday that disappointed analysts. The share price dropped by a further 2.4% yesterday.