Nompumelelo Magwaza
RETAILERS of furniture, household appliances, electronic goods and hardware saw an uptick in sales growth over the past six months, despite the decline in unsecured lending, which was likely to carry over to the second quarter of the year.
This was according to the latest Ernst &Young (EY) and Bureau for Economic Research Retail Survey for the first quarter of 2015 released yesterday.
The survey showed that durable retailers, which sell furniture, household appliances, electronic goods and hardware, remain optimistic about their sales outlook.
The survey also gave an indication that the overall retail sales volumes continued to mend during the first quarter of this year.
EY’s retail survey was in line with figures released by Statistics SA, which showed that growth in retail sales volumes accelerated from a five-year low of 1.4 percent year on year during the second quarter of 2014 to 2.2 percent in the third quarter and 2.4 percent year on year in the fourth quarter last year.
Despite the data from Stats SA showing that retail sales volume slowed down to 1.7 percent year on year during January, the results from the survey suggest that volume growth remained solid during the first quarter as a whole.
Retail and consumer products sector leader at EY Derek Engelbrecht said: “Hardware, paint and glass retailers are particularly optimistic about their sales prospects. Apart from a gradual improvement in building activity, these retailers may also be experiencing increased demand for products that could be utilised during the country’s increasingly frequent power outages, such as torches, batteries, gas, stoves, uninterruptible power source batteries or even small generators.”
Engelbrecht said this was happening despite a dramatic decline in unsecured lending and the deterioration in income growth during 2013 and the first quarter of 2014.
“These retailers have been under significant pressure in the past three years. So this is the first clear sign of some positive development as far as those sectors are concerned,” said Engelbrecht.
Business confidence among durable retailers went up from 61 index points in last quarter of 2014 to 79 index points in the first half of this year, the highest level since 2007. This means that four out of five durable retailers said they were comfortable with the prevailing trading environment.
Engelbrecht said it was difficult to say where such growth was coming from. “We are not sure if it is from the recent markdowns, or if consumers are passing down some of the fuel prices savings to buy furniture and appliances.”
Engelbrecht said business confidence of retailers have improved from 55 to 60 index points, meaning that three out of five retailers were comfortable with prevailing business environment. He said retailers had also indicated that sales volume growth increase was in line with their expectations.
However, Engelbrecht said retailers could also be getting used to the “new normal” of lower sales volume growth. “If it is in line with the expectation, what I can not tell you is whether retailers have adjusted with the new normal. But what is important was the sales volume growth was according to their expectation.”
He said sales volume growth had been bolstered by few factors, including a recovery in strike-affected income levels through the middle and lower income groups as well as the decrease in fuel price.
The other factor was the considerable decrease in the fuel price, which Engelbrecht said was a R4 a litre differential between August last year and February 2015.