SOUTH African retailers have remained pessimistic about business conditions in the short term as confidence dipped into contractionary territory in the first quarter of 2022.
The Bureau for Economic Research (BER) said yesterday that retailer confidence declined marginally from 52 to 49 points in the first quarter, dragged by food, beverages, pharmaceutical, cosmetic and hardware retailers.
Business conditions for food and beverages retailers deteriorated to its lowest level since the onset of the pandemic in 2020, while downward pressure on sales volumes intensified.
Overall, lower sales volumes knocked profitability, while current geopolitical and socio-economic risks may see non-durable retailers continue to struggle.
Profitability in the hardware retailers headed back into negative territory owing to lower sales volumes. Volumes deteriorated markedly as more people have returned to work and are no longer carrying out home improvements or DIY projects.
However, BER economist Shannon Bold said the survey showed that retailer confidence remained 10 index points above its long-term average.
Bold said that lower volume growth was met with higher profitability in general, showing the sector was improving, despite input cost pressures.
Confidence of the semi-durable retailers stood out at its highest level since the third quarter of 2015 as profitability improved from passing higher input costs onto the consumer.
Bold said furniture retailers also experienced higher profitability on the back of higher sales volumes, with business conditions expected to continue improving amidst a number of risk factors.
“The continued normalisation in the economy, with a large proportion of workers still returning to their physical offices and demanding more services, should continue to buoy volumes in sectors such as clothing and footwear retail and hospitality services,” Bold said.
BUSINESS REPORT ONLINE