Retail sales growth in South Africa has slowed and the curbing of credit‚ including unsecured lending‚ and a moderation in income growth‚ are worsening the downtrend in consumer activity.
Growth in retail sales slowed more than expected to a four-month low in February‚ to 2.2% year on year‚ Stats South Africa said last week.
This was well below the consensus expectation of 3.8% year on year‚ Investec group economist Annabel Bishop said‚ but in line with the deteriorating trend in real disposable income growth‚ depressed consumer confidence‚ slowdown in credit extension to the private sector‚ higher interest rates and high indebtedness of households.
Earlier this year‚ the retailer reported an 11.6% rise in sales to R7.7bn in the 21 weeks to January 19‚ driven primarily by a strong performance of UPD‚ its wholesale pharmacy business.
There has also been a reliance on promotional activity to drive volume in the health and beauty markets. The core Clicks chain grew turnover 8.4%‚ with dispensary sales rising 12.4% and front-shop sales 7.2%.
Two trends have been evident for the group so far - the switch to generic medicines‚ which account for roughly 40% of sales‚ and an increase in self-medication‚ both in part a result of efforts by medical aids and consumers to contain costs.
According to Clicks Group CEO David Kneale‚ the firm is endeavouring to optimise these shifts by switching patients to lower-cost generics‚ not least to its own Clicks and Unicorn brands by promoting over-the-counter medicines.
In the same 21-week period‚ Musica's same-store sales rose just 1%‚ in a declining CD and DVD market‚ as consumers shift to digital formats. Although the group has closed a number of stores‚ right-sizing its portfolio‚ its strategy is to be "the last man standing". One of its growth areas is technology and accessories like speakers and headphones.
Meanwhile‚ The Body Shop grew sales 6.3% for the period and in comparable stores by 2.9%. UPD increased turnover 19.5%‚ with inflation of 3%.
EY retail and consumer products sector leader Derek Engelbrecht said the deceleration in retail sales growth during the first quarter as revealed in the EY-Bureau for Economic Research survey was broad-based‚ with retailers in nondurable goods - such as food‚ groceries and cosmetics - and semidurable goods including clothing‚ CDs and toys now joining long-ailing furniture and household appliance retailers in reporting weak sales growth.
Reserve Bank communications that the next move in rates would be up‚ would suppress consumer confidence further‚ said Bishop.
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