Muted growth in January sales hits major retailers’ shares
SOUTH African retailers closed the Wednesday trading session deep in the red after data from Statistics South Africa showed there was muted growth in retail sales in January because of depressed consumer spending, which is expected to come under further pressure in the coming months.
Sales for food, beverages and tobacco in specialised stores declined 2.1 percent year on year.
Stats SA also said month-on-month price increases had been recorded for fruit, bread and cereals, cold beverages, fish and sugar, sweets and desserts in February.
Shoprite ended the session 3 percent down at R157.72, while peers Spar shed 2.94 percent to R189.62 and Pick n Pay was 1.79 percent weaker at R65.48.
The decline in the sale of food items was despite retail sales in general rebounding in January, increasing 1.2 percent on an annualised basis, compared with a 1.6 percent decrease in December.
Jacques Nel, an economist at NKC African Economics, said many headwinds had appeared on the radars of consumers, which would depress retail sales in the coming months.
“In addition, persistent load shedding has forced, and will continue to force, smaller retailers to temporarily shut their doors, which will weigh on retail sales going forward,” Nel said.
Five of the seven types of retailers reported positive growth during January, including retailers in textiles, clothing, footwear and leather goods, household furniture, appliances and equipment and pharmaceuticals, medical goods, cosmetics and toiletries.
The muted growth in retail sales in the period also resulted in clothing retailers coming under pressure on the JSE. TFG plunged 4.05 percent to R166.19, Woolworths shed 2.59 percent to R44.30, and Truworths lost 2.94 percent to R67.75.
Massmart’s stock bled 5.05 percent to R77.97, while peers Pepkor was down 3.66 percent to R17.92 and Mr Price was 1.8 percent weaker at R191.41.
Capital Economics economist John Ashbourne said that despite retail sales growth picking up in January, activity data across the economy as a whole had been weak at the start of 2019.
“Growth will probably remain subdued over the first quarter, but strengthen later in the year. Our GDP (gross domestic product) tracker, which uses activity figures to create a timely measure of economic growth, suggests that the economy was essentially stagnant in the first month of the year,” Ashbourne said.
A surge in fuel prices, a rise in electricity prices and an increase in food prices were expected to stymie consumer spending this year.
Data from the FNB/Bureau for Economic Research last month showed that consumer confidence in the fourth quarter of the year had held steady, indicating that most consumers were fairly optimistic that the outlook for the economy and their own household finances would improve during the next 12 months.