Retailers eye better festive season sales

Johannesburg -  Although retail sales growth is expected to be less buoyant than the robust rates recorded during in the 2010 and 2011 festive seasons, growth in sales volumes should top the rather weak number recorded last Christmas, a survey showed on Wednesday.

A substantial deceleration in unsecured lending and a sharp decline in consumer confidence levels have wounded furniture and household appliances retailers so far this year, but apart from these, most retailers surveyed by EY / Bureau for Economic Research (BER) reported better sales volumes in the run-up to Christmas compared with the 2012 festive season.

However, retailers remain cautiously optimistic that input cost pressures will ease, selling price increases will slow and volume growth will continue to mend during 2014Q1," said Derek Engelbrecht, Retail and Consumer Products Sector leader at EY.

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Talking at the results release of  the EY / BER festive season retail survey on Wednesday, Engelbrecht suggested that retail sales growth accelerated slightly during the fourth quarter of 2013 relative to the third quarter of 2013.

He said the majority of retailers surveyed also reported better sales growth compared with the 2012 festive season, when volume growth slumped to only 2.3% year-on-year (y-o-y).

“The sector for furniture and household appliances retailers has arguably been hardest hit by the slowdown in unsecured lending, indicating that sales volumes remained disappointingly low in the run-up to Christmas.

"However, sales of hardware products and semi-durable goods such as clothing, footwear, sporting equipment, CDs and toys remained healthy, while sales of non-durable goods such as food, beverages, groceries and cosmetics appear to be recovering from the low levels recorded earlier in the year."

He said the results from the latest EY / BER retail survey suggest that sales growth will be less buoyant compared to the robust rates recorded during the 2010 and 2011 festive seasons, but the growth in retail sales volumes should top the rather weak number recorded last Christmas.

Given positive base effects (i.e. the comparison with relatively poor 2012Q4 retail sales), volume growth may well accelerate from 2.1% y-o-y in 2013Q3 to closer to 3% during 2013Q4.

Engelbrecht said the recent uptick in employment, higher wage settlements and a welcome decline in the petrol price since September 2013 are in all likelihood boosting disposable incomes and alleviating some of the downward pressure on the non-durable goods sector.

- Fin24