Statistics South Africa (Stats SA) released SA’s January 2021 retail sales data on Wednesday (17 March). The overall number came in at a real YoY decline of 3.5% (vs a revised 1.2% YoY drop in December). This was worse than the 2.4% YoY contraction, which Bloomberg consensus economists had expected, and it was also the first negative surprise in retail sales since 3Q20.
Looking at the reasons for the worse-than-expected decline, the biggest negative contributors were the food, beverages, and tobacco stores and the general dealers’ categories. Food, beverages, and tobacco stores experienced a 33.6% YoY drop in sales (contributing a negative 2.6% YoY to the overall 3.5% YoY decline), while general dealers posted a 6% YoY decrease (contributing a negative 2.5% YoY to the overall 3.5% drop). Both categories of stores would have been hard hit by the alcohol ban that was in effect for the entire January. We believe these retail categories should rebound in the coming months as the alcohol ban was phased out since the beginning of February. MoM, retail sales were down 1.6%.
On the positive side, all other main retail categories experienced positive YoY growth. The momentum in the hardware, paint, and glass category continued as these retailers experienced YoY sale growth of 25.3%. The home improvement trend also continues to drive this category and the household furniture, appliances, and equipment category recorded YoY growth of 9.9%. We note that it will be interesting to see how long this trend of home improvement continues.
Another positive development for us, was that textiles, clothing, footwear, and leather goods broke a series of consecutive YoY declines, experiencing growth of 4% YoY in January. This may be attributable to consumers preparing their children to attend school again or themselves going back to the office in the new year. We believe that this category should experience a significant recovery in 2021 due to 2020’s (the midst of the COVID-19 pandemic) extremely low base.
All in, the resilience of the SA consumer continues to surprise us. Ignoring the effects of the alcohol ban, these retail sales numbers paint a picture of an SA consumer that may be in a far better position than originally feared.
