Bad times are useful in the blame game

For the better part of five years, our erstwhile politicians have blamed the decline in the country's fortunes on the struggles of the global economy. Like a stuck record, they've played that card for years.

While there's merit in the story, as lower commodity prices have been the result of factors beyond the control of the state, it's been doubly tough because of our many self- inflicted wounds, to a point where we just roll our eyes at such statements.

Looking at some of the corporate results released on the local bourse in recent weeks, it's becoming rather evident that South Africa's deteriorating macroeconomic story is going to be held up by the C-Suite as the main reason for less than stellar results.

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I was thinking how this environment provides some great cover for struggling companies to shift attention away from what actually may be a poorly performing management team.

For now, there's much merit in blaming the current climate for a missing earnings target. There's much blame to pass around for a poor set of results and in the weeks, months and, sadly, years to come, we are set to hear many a CEO blame the very uncertain times we live in for yet more disappointment.

But just as it has become an old tune for our politicians, it will (depending on just how long the slowdown lasts) at some point lose poignancy with investors.

The sector that seems to be on the sharp end of today's struggles is the retail sector. In the years following the end of the global recession, retailers such as Mr Price became the market favourites. But coming home to roost have been greater competition from foreign players, also looking for a bit of the growth offered by emerging markets, and now an economic downturn that was always on the horizon. From its peak about two years ago, Mr Price's shares have shed about 45%.

The shares of Massmart, owner of Game and Makro, plunged more than 8% on Friday after the retailer posted poor sales figures for just more than three months of trading. They reflected a paltry 0.5% sales growth from the previous period, with comparable store sales declining 1.7%.

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Since its May 2013 peak, the Wal-Mart-owned group is about 37% weaker.

Pick n Pay, whose turnaround story was gaining traction - at least in the minds of some analysts - also hit headwinds this week. Earnings growth disappointed and markets duly punished the grocer, with shares falling as much as 6% on the day of its results.

The story of disappointing sales growth looks likely to be the theme in this segment for the next few reporting seasons. And while it may placate investors, what they should be looking for is that retailer that manages through innovation to buck the trend.

In an upturn, virtually everyone and their dog can make a buck in retail, especially as South Africa's space is dominated by only a few big players. It's in the downturn where the actual strength of management is seen. There's quite a few relatively new head honchos in the headquarters of many of South Africa's big retailers, who are sure to be tested over the coming period.

Many South African corporates were pushed to seek expansion opportunities on the rest of the continent to avoid this eventuality. But for most it hasn't yielded the desired results.

This is the period in which one's stripes are earned. Cost cutting has long been a feature of corporate South Africa, little more can be done without affecting the actual operations.

derbyr@sundaytimes.co.za or follow Ron on twitter @ronderby