SEKGABO MOLELEKOA: Who stands to gain from consumers’ strain?
Incomes have deteriorated, especially among those with the most spending power, and retailers such as Mr Price could benefit as shoppers downgrade
SA is bracing itself for yet another year of consumer strain. Primaresearch’s analysis shows that consumers’ funds available for retail and discretionary spend may have increased by 3.6% year on year nominally in 2019, and expect 2020 consumer spending power to weaken. Their forecast points to an increase of 2.6% year on year in funds available for discretionary spending in 2020. Inflation has remained at historically low levels but consumer incomes have also deteriorated in line with low wage-growth statistics.
The largest decline in consumers’ disposable incomes has been observed in the top end of the consumer public, who have the most spending power. As the higher-income groups feel the pressure for austerity, so the choice becomes to reduce baskets or to downgrade where they shop. Mr Price could benefit from these demographic shifts. From a valuation perspective Truworths is also compelling but that is one for another day...
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