Johannesburg - South African clothing retailers Truworths and Foschini warned of tough trading conditions ahead after releasing slow sales figures, as the country's recession continued to hit the sector.
South Africa's biggest clothing retailer Truworths said 18-week sales from June 29 to November 1 rose by 10 percent to R2.3bn.
The company said on Thursday trading would be tough for the current financial year as consumers cut spending despite a series of interest rate cuts from the central bank.
The group said comparable sales grew by two percent.
Competitor Foschini reported an increase of 1.8% to 231.9c in diluted headline earnings per share for the six months to end September and also cautioned the first five weeks of its second half had been tough.
Foschini's retail turnover was up 7.9% to R4.1bn, while retail turnover for the first 5-weeks of the second-half rose 4.8% in tough trading. Comparable store turnover rose 1.2%.
Truworths shares fell over 2% after the firm issued the trading update and closed 1.77% lower at R41.60. Foschini shares closed 3.6% lower at R56.58, compared to a 2.41% weaker JSE retail index
"Both of these numbers confirm that we are not yet seeing a consumer that is willing to spend yet. If anything, in the mass middle market, things are still very tough and that's where the bulk of the retailers operate," one Johannesburg-based retail analyst said.
Truworths, which also competes with Woolworths and unlisted Edcon said trading space rose 9%, while comparable (same store) retail sales grew 2%.
The group's debtors book - reflecting credit extended to retail customers - inched up 11% to R2.6bn.
"I think with their trading space one would have thought they could have achieved better sales," said Michael Carlsson, a trader at Consilium Capital.
"Their same store sales only grew by 2% , while their inflation rate was 12%, the implication there is that volumes went backwards by about 10%," the retail analyst said."
Truworths deputy managing director Tony Taylor told Reuters that the new trading space and good performance in merchandise contributed to the 10 percent rise in earnings, but conceded the firm should have done better with growth in trading space.
"It's true (it could have been better), but we are in tough times at the moment and there's a lot of cannibalisation going on at this stage," Taylor said.
Outlook remains bleak
Foschini, whose whose chain stores include Markhams, American Swiss and @home, maintained its interim dividend at 118c despite the tough conditions. The group said it planned to open 40 more stores in the second-half.
South African retailers have struggled to keep sales rising as a recession in Africa's biggest economy has hit consumers spending and threatened job-losses.
Confidence among South Africa's consumers fell to 1 in the third quarter from 4 in the second quarter, a survey by First National Bank (FNB) and the Bureau for Economic Research (BER) showed at the end of September.
The FNB/BER survey said consumers were relatively optimistic about the outlook for the South African economy and their own household finances over the next 12 months but felt the present time was not right to buy durable goods.
South Africa's retail sales contracted by a worse than expected 7.0% annually in August.
The retailers woes have stirred hopes for another interest rate cut, despite many analysts arguing a rate cut may only happen next year.
The country's central bank has reduced interest rates by 500 basis points since December, but consumers still remain under pressure.
"I think we'll have a better idea of how things are going to shape up once we've been through Christmas, but I would not expect things to materially improve until at the earliest the second quarter of next year," the retail analyst said.
- Reuters