Bleak Christmas awaits shops

Johannesburg - Credit-orientated retailers which may have pinned their hopes on the festive season seem to be in for a depressing Christmas, analysts said on Wednesday after Statistics SA reported that retail sales fell 7% in August at constant prices year-on-year (y/y).

The 7% fall was widely unexpected as South Africa was thought to be gradually emerging from its recession, following a revised y/y decline of 4.1% in July, with third-quarter figures expected to indicate a decrease in the rate of decline in consumer spending.

Nedbank economist Isaac Matshego attributed the widening decline to higher unemployment as well as insufficient disposable income.

He said the figures also pointed to a weak looming festive season.

"Sales will remain depressed throughout the end of this year," said Matshego.

"We're only expecting to see some improvements early next year. This is not a good story for retailers."

Stanlib economist Kevin Lings said it was worth noting that total consumer credit spending had also come down from 19% to 3.6% on a year comparison, as consumers were becoming more careful about buying on credit. He said the trend was likely to continue throughout the year and would adversely affect credit-orientated retailers.

"The consumer is certainly not moving back to credit spending anytime soon," said Lings.

The Christmas season is traditionally a boom period for retailers, especially for furniture stores which generate up to 40% of their income during this period.

Furniture retailers are among the hardest hit by prevailing recessionary conditions.

- Fin24.com