CHRIS GILMOUR: October retail sales point to renewed consumer appetite

The October 2024 retail sales growth figures released by Stats SA in mid-December were outstanding, firmly endorsing the view that consumer spending has turned around as interest rates fall and Eskom load-shedding becomes no more than a nasty distant memory.

For the year to end-October sales growth as measured in constant 2019 prices rose 6.3%, a far higher growth rate than at any point in 2023 or 2024. Consumers are becoming confident again, after a lengthy loss of spending appetite. This view is endorsed by the FNB/BER consumer confidence survey for the fourth quarter of 2024, which shows sentiment remains high.

“Having soared from -15 index points in the first quarter of 2024 to a five-year high of -5 in the third quarter, the FNB/BER Consumer Confidence Index edged one point lower to -6 during the fourth quarter. Nonetheless, festive season retail sales are still likely to be jolly”, the BER said.

We will only know for sure whether this is the case when retail sales growth figures for November and December are released in January and February respectively.

Segmentally, there were some standout metrics. Household furniture and appliances & equipment sales soared 16.6% year on year, following a 12.2% rise in September. Although this is the smallest retail category in terms of rand spend, it nevertheless demonstrates that consumers are once again prepared to take loans to buy on credit as interest rates fall. This strength is reflected in the recent extremely strong interim results from Lewis Group, the JSE-listed furniture retailer.

The second-best performing category was general dealers (effectively large supermarket chains), where sales grew 11.5% from a year earlier. This is important because the category enjoys the largest rand spend of any category. It is mainly non-discretionary spending on food and related items, and contributed 4.9% of the total of 6.3%.

The reasons for this strength are pretty obvious: large supermarkets begin their festive season promotional activity from as early as September, so that by October and especially in November and Black Friday, sales growth was especially strong.

The third-biggest category was pharmaceutical & medical goods, cosmetics & toiletries, which grew 5.3%. Having been in the doldrums for a while, this category has gradually turned around in recent months and the growth surge in October can also be ascribed to heavy promotional activity at Clicks and Dis-Chem, the two main pharmaceutical retailers. Unlike general dealers, it is a relatively small category of spending, contributing only 0.4% of the total 6.3% in retail sales for the month.

Fourth was clothing & footwear and textiles & leather, which increased 3.1%. This category has been struggling for some time because of unfair competition from Far Eastern online clothing and related retailers such as Shein and Temu, but at long last this anomaly seems set to be addressed fully by the SA Revenue Service in terms of applying uniform rates of VAT and import duties on products imported by these retailers. It’s an important category, second in size only to general dealers, contributing 0.5% of the total 6.3% in retail sales for October.

And then there is hardware, paint & glass, a home improvement/DIY proxy. This category has been in dismal decline for years. Not since the early days of the Covid pandemic, when people started beautifying their homes while working from home, has this category enjoyed any strength.

Understandably, in the run-up to the festive season consumers aren’t giving much thought to home improvement, but this weak trend has been apparent for at least the past three years. Eventually it should change for the better, but there are no real signs of this happening any time soon. 

All other things being equal, November and December retail sales figures should have been relatively strong. 

• Gilmour is an investment analyst.