Skip to main content

ANC's ray of hope may boost retailers' prospects

| Economic factors

The outlook for consumer goods companies appears upbeat as a changing political landscape provides some impetus to a stuttering economy.

A study by EY has found that consumer goods companies remain under pressure because of slow volume growth but that a recovery was on the horizon in the next half year.

The EY analysis studied 13 listed consumer goods companies in SA with collective annual revenue of R170bn.

The study found that while revenue, earnings before interest, tax, depreciation and amortisation and headline earnings had fallen in the past reporting cycle, it expected the next cycle to be "stronger".

The consumer products and retail sector analyst at EY, Derek Engelbrecht, said anecdotal evidence suggested that retailers saw strong sales in November and December.

The momentum would be carried into the coming period thanks to positive sentiment, which has slowly returned since the ANC’s elective conference in December.

Volume and revenue growth remained under pressure because of the drought, coupled with weak local and international economic growth.

This saw year-on-year overall volumes rise a mere 1%.

Engelbrecht said the flat growth was directly correlated to the weak GDP growth.

The IMF’s growth forecast for SA has been lowered to 0.9% while others have postulated growth at 2.3% — closer to the 3.8% growth forecast for sub-Saharan Africa.

Engelbrecht said that while revenue growth was still not in positive territory, the variances between companies had narrowed. "But you want to see revenue change boosted by volume," he said, adding that some retailers had sacrificed margins to maintain volume.

Affordability was a key factor for shoppers, and some retailers were dropping prices to attract customers. "Price increases were a no-no in this period."

Pin It

Related Articles

South Africans are resilient people who are always ready to seek solutions for problems, even if the trials they face are caused by events that are beyond their control. An empowering example of this approach to life is the use of grocery stokvels...
In response to rising food costs, The SPAR Group offers practical tips for beating food inflation through savvy shopping and creative cooking.
By: Myles Illidge – MyBroadband South Africa’s Road Accident Fund (RAF) tax and General Fuel Levy (GFL) add between R272 and R483 to the price of a tank of fuel, depending on the size of your car’s tank.
By: Shaun Jacobs – Daily Investor Major changes are coming to VAT in South Africa, with the government looking to expand the range of food items exempt from the tax. 
By: Hanno Labuschagne - MyBroadband An anticipated strengthening of the rand and slipping global oil prices could result in lower petrol prices at the pumps next month.