Year-end sales boosted some retailers, hurt others

Last year was one to forget for retail companies listed on the JSE.

Changes made to the National Credit Act of 2005 bit into their share of the lending pie, while the downturn in the local economy - along with that of the African economy as a whole - meant consumers were less willing to part with their hard-earned money.

The only way to lure these reluctant spenders was to drop prices by scandalous proportions, a gamble that ended badly for more than one retailer.

On the clothing side, Mr Price Group has grabbed the headlines, telling the market that promotional activity in the quarter ended December 31 really hurt its sales.

Of all the clothing retailers, TFG, which owns 22 retail brands including Foschini, was the only one to release an upbeat trading statement, although its Africa operations were under pressure.

In the nine months to December 24, TFG reported a 14.5% rise in group sales. Growth for TFG Africa was 9.7% with same-store sales growth of 3.7%. Merchandise inflation for the nine-month period in TFG Africa averaged 8.5%.

In the general retail category, Massmart exploited the promotional environment through Makro, Game and DionWired, which were the big winners in the November sales.

story_article_left1

While Massmart was unable to dodge a decline in volumes, November sales would have given the group a boost. In the year to December 25, Massmart grew sales by 7.7% with comparable sales growth of 5.4%. Product inflation came in at 6.2%, which placed real sales growth in negative territory.

The latest data from Statistics SA showed retail sales growth of 3.8% in November. This was led by general dealers, which expanded sales by 4.7%, while hardware retailers grew sales by 5.4% and pharmaceutical retailers by 4.9%. Food and beverage sales grew 2.7%.

Boston Consulting Group MD and partner Stefan Salzer said that "deal-driven shopping frenzy did wonders for those retailers holding Black Friday promotions", but promotion-driven sales were unsustainable.

"Can an industry afford to be driven by promotions and deals?

"What we are seeing in South Africa is a consumer that has been trained to jump only when the prices are ridiculously low. They have no incentive to go to the shop if there isn't a deal.

"The retailers are really not doing themselves a favour in the long run but they all had to do it in 2016 considering the economy, and they might have to do it again in 2017," said Salzer.

Of the food retailers, Shoprite is the only one to have released an update so far this year.

Although in real terms the group experienced zero growth in its local operations, its non-South African supermarkets were star performers.

It reported a 10.7% increase in sales from local operations supported by good festive trading. Growth on a like-for-like basis was 7.4%, with internal inflation averaging 7.4% for the period.

The group's non-South African supermarkets recorded sales growth of 32.2%, and overall growth on a like-for-like basis was 14.2%. Taken at constant currencies, sales grew 51.7%.