Fashion and home retailers face a tough task making money from hard-pressed customers who have little cash for discretionary spend in 2023 amid rising interest rates, load-shedding and low consumer confidence.
Still, those companies that sell primarily on credit, such as furniture store Lewis and clothing retailer Truworths, stand to benefit from high interest rates, with economists forecasting at least one more increase this year.
The big question for analysts is whether the first holiday season of load-shedding led to fewer sales for apparel retailers, who rely on Black Friday and December for an income boost.
Trading updates in the last quarter of 2002 by the likes of Mr Price and TFG suggest that load-shedding keeps consumers from the shops and depresses confidence.
Trading updates on December sales are expected from about January 19 and these should show the effects of load-shedding.
Retail analyst Chris Gilmour said acquisitions are where revenue growth is coming from in the current environment. “Existing businesses without the benefit of acquisitions will struggle,” he said.
Market leaders
Mr Price should be able grow sales through its acquisition of footwear company Studio 88 — which includes the Skipper Bar brand — and also plans to increases the number of Yuppie Chef stores from 10 to 70 as it targets the more aspirational customer. It aims to increase the number of kitchenware stores to 14 before the end of its 2023 financial year.
TFG continues to grow sales, through acquisitions including Tapestry, the owner of Coricraft, and Dial-a bed, while in December it announced the purchase of Street Fever footwear retailer, in a transaction too small to require a public announcement on the Stock Exchange News Service (Sens).
However, the owner of UK brands Phase Eight and Whistles failed in its bid for clothing retailer Joules. The company was under a form of bankruptcy protection, but TFG was pipped by a much higher offer, according to a report from Sky News in December that cited Interpath Advisory, the company in charge of Joules’s administration.
Pepkor, the owner of Ackermans and Pep, doesn’t have the benefit of local acquisitions after being beaten in the race for Tapestry by TFG.
While its purchase of discount clothing retailer Avenida has been successful in Brazil, it accounts for a very small portion of the group’s revenue.
Focus on baby goods
Retailers looking to expand, while bearing consumers’ weaker position in mind, have also added a focus on baby goods, which tend to be more defensive in tough timers. Mr Price, Shoprite and Clicks are now offering babywear, increasing competition for Ackermans and Pepkor, which have dominated the sector in recent years.
Competition for clothing sales is also increasing. Shoprite is scheduled to open about 10 stand-alone stores from March this year, but it is still far behind Pick n Pay’s 300 or so such outlets.
Truworths, which owns the YDE and Identity brands, dominates in the aspirational and credit space. Few competitors come close to its almost 70% level of sales concluded on credit that has enabled it to benefit from higher interest rates charged to consumers on its 12-month interest-bearing purchase plan.
The group leads in aspirational children’s clothing with brands such as Naartjie, Earth Child and Kids Emporium. It is also opening a new distribution centre and is faring better in the UK, where it owns shoe chain Office.
Locally it continues to expand into the discount space with clothing brand Sync.
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