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The SA Daily 24 June 2020

Retailer revenue poorer

  • Both the April consumer inflation and March retail sales data releases are due out today; consumer inflation likely dropped to 2.8% y/y, from 4.1% y/y in March.
  • Bloomberg consensus foresees retail sales volumes growth at 1.9% y/y in March, from February’s 2.0% y/y. April would have suffered more due to the lockdown as those retailers not classified as essential services couldn’t trade.
  • Already, retail sales volumes averaged just 1.2% in 2019, after growth of 3.3% in 2017 and 2.4% in 2018. The 2003-2019 average was a comparatively robust 4.3%. Therefore, 2020 likely will see very poor sales performance amid the impact of the pandemic on jobs and incomes; we forecast household consumption expenditure to contract by 9.3% y/y this year.
  • Poor retail sales volumes come against the backdrop of prolonged weak domestic demand, with most retailers’ profitability hampered by rising costs from municipality tariffs, high electricity costs, and intermittent power cuts having a detrimental impact on both formal and informal retailers.
  • To demonstrate, retailers’ business confidence has been falling, recently recording just 11 pts in 2Q20 due to a trading environment not conducive to profits. Retail sector jobs account for 42% of the total trade sector jobs; retail jobs stood at 976,195 in 4Q19, per the Quarterly Employment Survey. There will be further job losses due to the pandemic, further weakening domestic demand and further straining retailer revenue.

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