Shoppers to tighten festive purse strings
December 18, 2007
By Tom Robbins Cape Town
After five years of bumper Christmas sales, analysts expected a subdued season and warned that it would get worse early next year as consumers would feel the effects of recent interest rate hikes.
But it is not all doom and gloom. The expectation is that despite interest rates that have risen for longer than expected, the country has not been derailed from its longer-term consumer growth story.
In general the most expensive products categories were expected to be the hardest hit over the festive season but the traditionally stable categories of food and alcohol would prevent a decline in overall retail sales
Barbara Price-Hughes, a research analyst at BoE Private Clients, expected the December sales growth trend to be halted this year. Price-Hughes thought real sales would be roughly similar to those of last year, this after taking inflation into account.
According to Statistics SA, furniture sales have already fallen into negative territory but Price-Hughes did not expect clothing sales to fall, though it was likely that sales growth in this category would continue to moderate.
But Price-Hughes said food sales to the bottom end of the market continued to be strong, as evidenced by the fact that food processors were battling to meet demand.
Abri du Plessis, chief investment officer at Gryphon Asset Management, expected food and alcohol sales to be the star performers, as they benefited from continuing growth in the middle class.
Moreover, Du Plessis believed lower debt levels at the bottom end of the market would help spending on these items.
He expected this to result in real growth for retailers such as Spar, Pick n Pay and Shoprite, but at a lower rate than last year.
Du Plessis expected roughly flat real growth in spending on clothing as consumer spending slowed on discretionary items. But he expected volume sales of popular electronics, such as flat screen TVs, to rise thanks to continuing price cuts, helped by the stronger rand. But Du Plessis said because of this manufacturing deflation, rand value sales would be under pressure.
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