Shoprite CEO cautious on retail

Cape Town - Although retailers have previously experienced volatility when inflation, for instance, has been sky-high, Shoprite group chief executive Whitey Basson says that local retailers are currently waiting to see the effect of a global recession on South Africa.

"It mustn't be ignored," he said after the group's annual general meeting.

The effect of the global economic turbulence on the local market, consistently high food inflation, and the rand's volatility against important currencies, makes it difficult to predict trading conditions for the nine months to June 2009.

In the three months to end-September this year total sales increased by 25.9%, which means that the comparative period's growth has been maintained. The group's domestic market share improved by 1.5% as a result.

Basson reckons that in provinces like the Eastern Cape the economy has already begun to "cool down".

In a recent survey by investment bank Merrill Lynch, 75% of fund managers interviewed expected that South Africa was heading for a consumer recession.

When retailers themselves were asked, the leisure, food, beauty and pharmaceutical industries, in particular, appeared to remain optimistic.

"Nothing at the moment indicates that a catastrophe is on the way - but then nobody thought the banks were going to collapse,? says Basson.

Shoprite, which serves consumers in the lower LSM groups, is expected to continue performing better than Checkers, whose consumers fall in the higher LSM groups.

"It therefore makes more sense for me to open cheaper stores than to invest in the upper end of the market," reckons Basson.

- Sake24