Trends
The year ahead: 2 Holiday sale indicators
Feb/ Mar 2009
(1) Major retail chains do well
As most experienced retailers know, December sales form the backbone of their income for the year and are usually an indication of things to come. Judging from the performances of the major chains listed on the stock exchange, there is reason for optimism (although the full picture will only become clearer in March after most year-end results are released). But, so far the picture looks brighter than what many expected.
Edcon’s retail sales for the quarter to December increased 9.7% — and according to CEO Steve Ross, they were satisfied with the performance of the Edcon retailers over Christmas (1 154 Edgars, Jet and Discom retail stores).
Foschini also says that Christmas trading was above expectation across all divisions, with sales growth for December of 9.9% and same-store growth of 3%. In the three month pre-Christmas period group sales increased by 8.7%. In the 2008 financial year the sports division — Totalsports (turnover R645.4-m up 7.7%), Sportscene (turnover R414.9-m up 7.4%) and DueSouth (R91.1-m up 18.1%) — increased its total turnover by 9.8% to R589.1-m. During that period this division opened 15 more stores to increase their total to 234 stores, namely 106 Totalsports, 86 Sportscene and 16 DueSouth stores.
Mr Price Group reported sales growth of 21.4% over the December holiday period and 17.5% growth on a comparable basis. Although the outlook for their sport division looked less rosy, Mr Price Group reported a 20.3% rise in third-quarter sales in January, based on higher clothing sales and the fact that they opened 66 new stores. Turnover in the core clothing unit (72% of total sales) grew 25.7%. According to a statement issued by the company, like-for-like sales, which includes sales of expanded stores but not new ones, rose 15.3%. Prices increased about 6.3% during the three months to end December.
Mr Price Sport, however, reported a drop in sales per m2 from 12 703 (2007) to 9 513 (2008), according to the Interim report for the first 6 months of 2008, ending in September. Price inflation was -7%, indicating high volume markdowns. The number of stores increased from 12 in the same period in 2007 to 29 in 2008, growing 1st half revenue from R83-m (2007) to R166-m (2008). Following a disappointing year end result in March 2008, Mr Price Sport moved away from slow-selling bigger items like gym equipment and started doing apparel sourcing in conjunction with Mr Price, which concentrates on stocking high densities of their own brands, including the sportswear brand Maxed.
Massmart’s half-year results increased 13,2% over the prior period with inflation estimated at 9,9%.
(2) Industry expectations met
Sales over the December holiday period met the expectations, or better, of the majority (77%) of retailers that responded to Sports Trader’s annual survey. Especially the chain stores seemed to have bucked the trend over the holiday season by clocking up higher than expected sales (67%).
Expectations vs Real
Customers 2007 vs 2008
December sales (volume)
2007 vs 2008
Items customers wanted to buy
December sales (Rand value)
2007 vs 2008
In our annual survey of trading conditions in the sport, outdoor and lifestyle/leisure retail trade over the Christmas holiday period, 31% of all the respondents said that their sales were better than expected, while 46% said that their sales were what they expected (although this could indicate that they did not have high expectations!). About a third of the respondents (36%) said that the sales were worse than they expected.
Most respondents (50%) reported that their customers bought more functional, but high-priced items, while customers of 42% bought more mid-priced items. Only 8% reported that customers bought more luxury, high-priced items — while a quarter said that their customers preferred lower priced items.
The survey was done via email questionnaires and telephone interviews and of the responses we received, 28% were from sport stores, 28% from retailers selling both sport and outdoor goods, 31% from outdoor retailers and 11% from footwear and clothing specialists. The majority, 72%, are independent retailers. Half of them are based in a major city, 14% in a holiday destination, 22% in a platteland town and 17% are part of a countrywide chain of stores.
More than half the respondents (58%) had fewer customers through their doors than the year before — but 22% reported more customers, while 19% said they had about the same number of customers. Yet 45% of the respondents reported higher pre-Christmas sales in Rand value than the year before (28% said a little higher and 17% said a lot higher). Of the 50% who reported lower sales in Rand value, 22% said it was a lot lower and 28% said sales were a little lower. About the same ratios applied for sales volumes, except 14% of the respondents said sales volumes were about the same as the previous year, while only 8% had a lot higher sales in volume (28% had a little higher sales volume).
More than 40% said that their January sales were better (19%) or the same (22%) as last year, while 36% said January sales were lower this year.
The outdoor retailers were the most upbeat — 55% reported better than expected Christmas sales and 45% had more customers than the year before. They seemed to benefit the most from the trend amongst customers to buy functional, yet higher priced items (73% of outdoor retailers). More than two-thirds of the outdoor retailers (64%) reported higher sales than the year before in Rand value, and 54% reported better sales volumes.
Many commented that customers bought a lot of camping or watersport equipment, indicating a trend identified by some analysts that consumers either stayed at home over the Christmas holidays — where they enjoyed various outdoor activities — or cut down on expensive hotel holidays to go camping. Most of the outdoor respondents (54%) are situated in major cities.
While most (90%) sport retailers, mainly from major cities (80%), had fewer customers through their doors, the same number reported that holiday sales were about what they expected as those that had worse holiday sales than expected (40%). But, actual sales were disappointing as 60% reported lower sales than the year before — 40% said sales were a lot lower in Rand value, while 50% said sales were a lot lower in volume. Of the 40% who reported higher sales in Rand value, 20% said it was a lot higher and 20% reported that sales were a little higher.
Most (60%) sport retailers had a big demand for mid-priced items, while 40% found that customers asked for lower-priced items, 20% reported a demand for functional, high priced items and 10% had customers who wanted high-priced luxury items.
Retailers who sell sport as well as outdoor items reported a high demand for functional, but still higher priced items (60% of respondents), while 40% had customers that aimed for mid-priced items. Many of these retailers (40%) are situated in holiday destinations, which seemed to have attracted fewer holiday makers than previous years, and it is thus not surprising that 60% reported lower sales volumes and values than last year (20% said a lot lower and 40% a little lower). Half of them reported that these sales were worse than they expected.
Sixty percent of the retailers situated in holiday destinations said their pre-Christmas sales were worse than they expected, while 80% said they had fewer customers through their doors. Of the retailers in the major cities, 61% reported fewer customers — but 45% reported higher sales in Rand value than last year (17% said a lot higher, 28% a little higher) , while 44% said sales were lower than last year. Their customers preferred mid-price items (44%), while 39% reported good sales of functional, but higher priced items.
The footwear and clothing retailers — all independents — also reported lower sales in volume and value and fewer customers.
