CHRIS GILMOUR: Retail sales outlook is poor in a country with few cushions

It’s a very grim read for the April and May SA retail sales figures. Not only is sales growth still deep in negative territory, it is also lagging in international terms. And with the average consumer’s disposable income taking a big knock in June, another year-on-year decline for that month appears inevitable.

Stats SA didn’t release its April retail sales figures in June, as would usually be the case. Instead, it incorporated them into a double volume in July, when both April and May figures were released. Also, many figures from March were extensively reworked, but this made little or no difference to the final trend. The bleak result is that total April retail sales declined by 50% year on year, bouncing back to a decline of 12% year on year in May.

The category of “all other retailers”, which includes online shopping, second-hand goods, bookshops, jewellers, sports goods and entertainment stores, was worst affected, with April sales declining 90% year on year, only “recovering” to a decline of 56% in May.

The strict lockdown during levels 5 and 4 would have affected these outlets especially hard, as very few of them would have been open during this time.

Intuitively, online shopping should have performed well, with many people preferring to stay at home during April and May. However, online is such a tiny fraction of total retail sales (less than 2%) that its contribution is hardly measurable. The contribution of “all other retailers” was 11% of the total 50% decline in April; and more than half at 7% of the 12% decline in May.

Clothing, footwear, textiles and leather (CFTL) sales slumped 95% in April. However, this category rebounded sharply in May to record a positive 3% growth rate year on year. This recovery was due to pent-up demand, with consumers being compelled to shop from a very limited range of apparel products during May. CFTL sales contributed 18% of the 50% April fall, but contributed a tiny positive 0.4% to the 12% May drop.

Furniture and household goods slumped 89% in April, recovering in May to a negative 30% year on year. Like CFTL, most furniture and appliance sales were hobbled during April and May, with most outlets being closed.

SA’s retail recovery does not match up to the strong rebounds in all categories seen in the US and UK. This is probably due to the huge financial relief and government interventions in those countries, such as employee furlough assistance and federal unemployment benefits. In SA, the social safety net — in general and in times of emergency — is scant and hobbled by bureaucracy. The numbers show that UK retail sales fell 18% in April, then bouncing back by to a positive 12% year on year for May. Similarly, in the US, retail sales fell by 15% in April, recording a robust bounce back of 18% in May.

Stats SA will soon be releasing June’s retail sales figures and it is not likely to be good news. Data from BankservAfrica’s latest take-home pay index shows that the number of monthly salaries paid in June declined annually by 21%, affecting a fifth of employees’ salaries. If this is accurate — and if anything it may be too conservative — then the consequences for retail spending in June will be dire.

The Temporary Employee/Employer Relief Scheme ends in August, leaving many people without any income after that. Unemployment, a lagging economic indicator, is generally acknowledged to have soared in the past few months as many businesses have closed down. Estimates vary, but anywhere between 1.5-million and 3-million people may have lost their jobs as a result of Covid-19.

These two factors should combine to put further downward pressure on an already enfeebled retail sector.