Stats SA recently released the retail sales figures for May 2023 and they generally make for dismal reading.
Overall, retail sales fell in constant 2019 terms by 1.4% year on year, after a revised 1.8% drop in April. Every month in the 2023 year to date has seen a drop in retail sales. That hasn’t happened in the past five years and highlights just how tough retailing conditions have become, with a few exceptions.
Ignoring the “all other retailers” category, the only positive in May was clothing, footwear, textiles & leather (CFTL), which has shown relative strength since the severe lockdown restrictions of the pandemic era were lifted.
The biggest negative factor in these results, given its huge relative size, is general dealers, which recorded a 3.7% fall. The other food category, retailers in food, beverages & tobacco in specialised stores, reversed by 4%. Combined, those two categories account for R46.8bn out of a total retail sales figure of R92.6bn. The trend that of consumers buying less food in retail stores and opting instead for more takeaways, has been in place for a while now and appears intact.
CFTL rose by 10.3% in May after revised growth of 1.5% in April. The category is benefiting from CFTL retailer offering more credit even though interest rates are at historically high levels. It can be argued that there is a degree of distressed spending by consumers in this regard and only those CFTL retailers that are able to offer credit responsibly will do well under these conditions. CFTL contributed R18.2bn out of the total in May, or 19.7%, the second-biggest contributor to overall retail sales.
The pharmaceuticals & medical, cosmetics and toiletries category should intuitively be a resilient, defensive sector; yet it has exhibited declines in retail sales for at least the past six months. The reasons are many and varied but the main ones appear to be less consumers being less concerned about their immune systems after the Covid-19 pandemic ended, fewer vaccinations taking place in pharmacies to combat the virus, and fewer people requiring medication to treat some of the symptoms associated with it.
The household furniture, appliances and equipment category saw a 5.8% fall in May after a revised 2.1% drop in April. This is the most discretionary of all the categories of retail spending in the survey and most vulnerable to higher interest rates.
Furniture and appliance retailers such as Lewis have tried to soften the blow with their credit offerings but even this isn’t really having much effect. Unless and until interest rates decline sustainably, this category of retail spending is likely to remain under pressure.
After a revised 2.4% growth in retail sales in hardware, paint and glass — a proxy for DIY/home improvement — this category’s sales slumped again in May, dashing hopes of a sustained recovery. Home improvement retailers such as Cashbuild and Italtile will draw no encouragement from these figures.
The catch-all category of “all other retailers” reported growth of 0.5%, which isn’t meaningful as the category is too diverse to draw any conclusions about consumer spending generally. That is a pity, as the category includes online retailing, where growth appears to be strong in SA.
The Reserve Bank decided to pause its interest rate hike in July, in line with what happened at the US Federal Reserve earlier. But the Fed has made it clear that it expects to raise rates at least once, if not twice by year end, in which case the Bank will probably follow suit.
That being the case, SA consumers are likely to remain under severe pressure for the foreseeable future and only the slight improvement in load-shedding is offering any relief.
• Gilmour is an investment analyst.
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