Souring consumer sentiment in the second quarter of 2016 could hint at weaker full-year results from SA's top retailers.
Consumer confidence as measured by the FNB/BER survey dropped to a reading of -11 in the second quarter of 2016 from a reading of -9 in the first quarter. Investec economist Kamilla Kaplan said, at this level, confidence remained entrenched below levels last seen during the 2008-09 recession. As a result, there would be dampened activity in the consumption side of the economy, said Kaplan.
Retailers due to release results in August include Shoprite Holdings and Woolworths. These retailers, who sit at opposite ends of the consumer scale, can be seen as a litmus test of how well shoppers are coping in the prevailing environment.
More than 70% of Shoprite Holdings’ revenue is earned from its supermarkets in SA. The retailer remains the largest in Africa. It has 357 shops in the rest of Africa, and plans to add 58 more by June 2017.
In its interim results for the period ended December 2015, CEO Whitey Basson said the company’s operations offshore could possibly offset the weak conditions at home. Shoprite would deliver "reasonable results" in the second half of the financial year, "provided the current economic climate does not deteriorate further".
In the past year, Shoprite Holdings’ share price has dropped about 2.81%, making it an underperformer in the Food & Drug Retailers index, which has seen growth of 2.56% in the same period.
Woolworths’s share price has taken even more of a beating, falling 19.38% in the past year. In the interim results statement for the year to end-December, CEO Ian Moir said as a result of the deterioration in the outlook for the global economy, conditions were expected to be more difficult in its main markets — namely SA and Australia.
In March, top executives in the company sold millions of rand worth of Woolworths shares. Moir offloaded shares worth R57m, while Woolworths SA CEO Zyda Rylands disposed of R12m worth of shares.
