Warning for shopping centres in South Africa as retail sales fall
Retail trade sales decreased by 2.5% year-on-year in June, mainly dragged lower by general dealers, new data from StatsSA showed on Wednesday (17 August).
Negative annual growth rates were recorded for:
- Retailers in hardware, paint and glass (-8.6%);
- General dealers (-5.7%); and
- Retailers in pharmaceuticals and medical goods, cosmetics and toiletries (-4.3%).
The largest negative contributors to this decrease were:
- General dealers (contributing -2.8 percentage points); and
- Retailers in hardware, paint and glass (contributing -0.7 of a percentage point).
The largest positive contributor was retailers in textiles, clothing, footwear and leather goods, contributing 0.8 of a percentage point, said StatsSA.
Retail trade sales increased by 0.5% in the second quarter of 2022 compared with the second quarter of 2021. The largest positive contributor to this increase was retailers in textiles, clothing, footwear and leather goods at 3.4%, contributing 0.6 of a percentage point, it said.
John Loos, property sector strategist at FNB Commercial Property Finance, noted that real (inflation-adjusted) retail sales growth for June was weaker than the previous month’s +0.1% growth. “This means that the quarterly year-on-year growth rate has slowed from +2.8% in the first quarter of 2022 to 0.5% in the second quarter.
“The slow growth in real retail sales reflects a recent acceleration in retail price inflation, most notably – but not only – in the specialised food, beverage and tobacco category (7.6%) of retailers as well as in the general dealers category (7%), the latter retail category where much of the general food and grocery retail is found.
“A global and domestic food price inflation surge has been a key driver here,” Loos said.
For shopping centres, Loos said that those focused more on basic necessities such as food and groceries don’t have it all their own way as anticipated, with the general dealer category of StatsSA retail data, along with health care and pharmaceuticals retail, feeling some sales pressure.
“However, we still expect these categories of retail to prove to be more insulated against the recent increased consumer financial pressures, possibly remaining more stable than those centres more focused on non-essential purchases such as entertainment and eating out, luxury goods, and postpone-able expenditure items,” the strategist said.
Postponeable expenditures are often found in areas such as clothing and footwear, furniture and household appliances, or hardware, paint and glass products for home maintenance, he added.
Larger regional centre categories may ultimately be at a relative disadvantage compared to many neighbourhood and convenience centres in this regard, because they do often have a greater focus on clothing and footwear, fashion, and entertainment of various types along with household furniture and appliances retail, all of which can be quite cyclical and experience pressure in tougher times, Loos said.
However, the recent data is not firmly against the larger centres yet, he stated.
“The major clothing, textiles and footwear retail category had recovered quite nicely following the pain of the hard lockdowns of 2020, and at June 2022 was still 6.8% above the pre-lockdown level of June 2019 as households played catchup on clothing and footwear spend following the lockdown period.
“The household furniture and appliances retail category is another very cyclical one not yet showing too much pressure as at June, growing slightly positively by +0.5%, and still +10.4% above the level of June 2019 in real terms.”
FNB said that properties with a key focus on the hardware, paint and glass retail category face pressure following a major real decline of 8.6% year-on-year in June. “These expenditure items, often related to home maintenance, can often be postponed in times of increased financial pressure, and this appears to be what is happening.”
Low-income area essentials-focused retail centres won’t have it all their own way either, Loos added.
“It won’t be all plain sailing for those retail centres focused largely on basic essentials such as food and grocery shopping in low-income areas. Former township and rural centres outperformed others in many cases during the lockdown period, their essential retail having avoided lockdown measures to a greater extent. But they now have the challenge of keeping the basic items affordable in an environment where food price inflation may be outstripping income growth,” he said.
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