Mr Price. Picture: SUPPLIED
Mr Price. Picture: SUPPLIED

Judging by their latest trading updates, SA’s clothing retailers got very few gifts from Santa Claus.

The festive season tends to be a boom time for shops, as the sector makes a fat chunk of its sales in the last few weeks of the year.

However, those who were hoping that Christmas sales would lift SA out of its economic doldrums were disappointed, as the country’s leading retailers, Woolworths, Truworths and Mr Price, all reported low single-digit sales growth for the period.

Woolworths says sales for the 26 weeks to December 23 were up only 2%. At Truworths retail sales in Africa rose 2% for the 26 weeks to December 30.

But the real shocker was Mr Price’s performance. Its SA retail sales rose only 1.1%, to R6.2bn, in December.

The exception was TFG, which managed to push up turnover 8.3% for the period.

Yet analysts say the low figures do not necessarily mean that the companies performed poorly, as the sector had to put up with a tight economy for the better part of 2018. Rising fuel prices, real wages that did not keep up with inflation and an increase in VAT thinned out the wallets last year.

And there’s more bad news: those looking for a quick turnaround will be disappointed, as the economy is not likely to improve any time soon.

Consumer confidence is low and expected to remain so, because the job market remains weak.

In a research note, Nedbank points out that consumers have been concerned about how much debt they were carrying: "Slightly higher debt service costs following an interest rate hike in November and tight bank lending standards will also cause consumers to continue to readjust their spending patterns and be cautious of spending on nonessential items."

Though conditions are difficult, Mr Price’s modest performance for the festive season is shocking, as it came in total contrast to its numbers for the half-year to end-September, when it increased revenue by a robust 7.8% to R10.53bn.

Its December figures were surprising also because the group is a discount clothing retailer that predominately sells its clothing for cash, which means it should be better placed to deal with a slowing economy.

Mr Price knew difficult times lay ahead. Incoming CEO Mark Blair warned in November that economic growth is likely to remain "muted" because the government will not push through needed structural reforms until after the national elections, scheduled for May.

Independent retail analyst Syd Vianello says the flat numbers coming from Mr Price should not necessarily be seen as a failure on the part of its management.

For years the firm did not have much competition, but it was now up against international players like H&M and Cotton On. Vianello says it is not inconceivable that the two companies (which don’t make their numbers public) gained market share at Mr Price’s expense.

Besides the tough economy, Mr Price says, it was also affected by shorter school holidays and a less-than-impressive performance from its Black Friday sales in November.

Mr Price’s inability to capitalise on Black Friday went against the trend. According to Stats SA, Black Friday boosted retail sales by 4.2% for textiles, clothing, footwear and leather goods in November.

TFG did not have the same problem as Mr Price, as it says healthy Black Friday sales were one of the main reasons it produced solid numbers in the lead-up to Christmas.

For its part, Woolworths was still finding its way after sales in its fashion, beauty and home (FBH) division, which houses clothing, dropped 1.5% to R13.68bn for the year to end-June.

It shocked the market when it reported that SA sales for FBH had fallen 3.3% for the 20 weeks to end-November. Its December numbers showed something of a turnaround, however, says Argon Asset Management equity analyst Bjorn Samuels.

"The FBH segment has plenty of challenges aside from the constrained SA consumer, such as new interim management and even disruption from switching the David Jones product back to the core Woolworths’ line.

"Given these headwinds I think the results are not all that bad," he says.

Gryphon research analyst and portfolio manager Casparus Treurnicht agrees.

Though Christmas sales for retailers were subdued, it could have been a lot worse, he says.

"It’s not a train smash, just a slowdown."

Even with the recent decline in retail shares, Treurnicht believes they’re still a relatively expensive pick.

"Looking at their p:es — Dis-Chem on 34, Mr Price on 23, Pick n Pay on 24, Shoprite on 21, Woolworths on 16 — they are too high for negative earnings growth."