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Holiday sales | More sales before Christmans | South African retail
March 2015

It was indeed a Merry Xmas!

More customers visited stores to buy higher priced luxury items before Christmas 2014 than the previous years, retailers who responded to our annual Holiday Sales survey report. Could this signal the beginning of a recovery for the industry?

Could we be emerging from the blanket of gloom that hung over South African sport, outdoor and lifestyle retailing the past few years? The feedback we got from retailers in our annual Holiday Sales Survey certainly seems to indicate that. The retailers who responded were remarkably positive about trading conditions over the Christmas holiday and January sales period.

For example, 61% said their pre-Christmas sales were better than what they expected ... over the previous three years (2011-2013) an average of 25% respondents said their pre-Christmas sales were better than expected. What’s more, over the past three years about 30% (on average) respondents said their pre-Christmas sales were worse than expected ... but only 11% said they were disappointed this time.

When it came to actual sales, 82% respondents reported that their December sales were higher than the previous year — 39% of them reporting sales increases of more than 20%. In comparison, over the past two years 50% (2013) and 43% (2012) reported higher Christmas sales than the previous years, and only 15% and 10% reported sales increases of more than 20%.

Only 7% of the respondents this year reported a drop in pre-Christmas sales, compared to 35% the year before and 37% the year before that (2012).

While respondents were not quite as upbeat about the improvement in their January sales as in December, they were certainly much more positive than the previous two years: 54% reported year on year sales growth for January 2015, compared to 32% (2014) and 34% (2013) the previous two years.

There were also fewer retailers who reported a drop in comparable sales than the previous two years, namely 20% in January 2015, compared to 37% (2014) and 40% (2013).

This year’s holiday sales responses are more in line with December-January 2011-2012 when retailers 62% of retailers reported year on year sales growth in December, and only 16% said that sales were lower than the pre-Christmas season the previous year. In 2012, more than half (51%) of respondents reported higher sales in January than the year before, and only 14% said their sales dropped compared to the same month a year before.

This year as many as 71% of the respondents said they had more customers in their stores over Christmas than the previous year, compared to 25% who last year reported they had more Christmas shoppers. In 2013 nearly half (45%) of the respondents said they had fewer customers in their stores than the year before, but last year (2014) only 14% had fewer Christmas shoppers than the previous year.

Not only did more feet enter stores, they also bought up and spent more money in store over this holiday season. This time around many more retailers reported that their customers bought higher priced, luxury items for Christmas, namely 41%, compared to 15%, 13% and 11% the previous three years. On the other hand, 11% said their customers this year mostly bought lower priced items, compared to 20-27% the previous three years.

Most retailers, however, report that functional, yet higher priced items like footwear and clothing, were the most popular sales items over the period. This year 63% reported that their customers mainly bought this category of merchandise before Christmas, compared to 45% (2013), 53% (2012) and 51% (2011).

This Christmas fewer retailers report that they sold more mid-price items (44%) than the previous three years: 75% in 2013, 63% in 2012 and 59% in 2011.

But, despite the positive reports on the Christmas festive season, most retail respondents still regard the economy, which results in fewer customers spending less money, as the biggest challenge they face. Since the 2012 survey 39-40% of the respondents have identified this as their main challenge.

This is followed by respondents identifying growing competition from other retailers as the biggest challenge they face: 25% this year identified this as a threat, compared to 30% last year and 19% the year before.

The third biggest challenge identified by 14-15% respondents is distributors selling directly to their customers. “Other than competing against our suppliers, the economy has also contributed to affect sales over the last season, but the biggest challenge is direct selling,” commented Dale Hermanson of Sports Horizons.

“Finding a way of reaching the general market instead of just our own niche customers,” is the biggest challenge for a respondents who chose to remain anonymous.

Interestingly, relatively few respondents regard online trading as a threat to their stores (7% now, 5% last year and 11% the year before). And the growing number of discount stores, often Chinese? Hardly a blimp for the retail respondents — the previous two years none of the respondents regarded this as a threat, this year only 4% regarded this as a challenge.

For 10-11% of the respondents the fact that top brands refuse to supply them is a major challenge to trading. Coupled to this is the problem of wholesalers not always having stock available, says Christo Kriek of Highland Outdoor. To succeed, a retailer must always have new brands available, explains Omarjee Shabbir of Omarjee Sports.

When looking at the Rand value of sporting goods imported during the third quarter (Q3) of 2014, it would appear that the industry was not anticipating this positive consumer response. The Rand value of imported sporting goods in this period was only 5% higher than the corresponding period in 2013.

A large number of sporting goods are pre-ordered and many distributors reported that retailers had been ordering stock very cautiously during the year, as they were scared of being caught with unsold stock. Suppliers couldn’t increase their stock orders without retail support as nobody could predict whether the buy-shy consumers were saving up to splash out over Christmas, or not.

In comparison, Q3 imports in 2013 were 18% higher than the year before and in 2012 the import value was 24% higher. Q3 2011 the sporting goods imported were, however, 1% lower than the corresponding period in the World Cup year.

Retail results

The interim results published by the listed retail chains at the end of 2014 for the first six months of the current financial year indicate that the suppliers’ caution was justified. Sales growth, especially comparable (like-for-like) store sales, were modest when compared to the double-digit growth of a few years ago.

The Holdsport group grew sales 7.3% to R677.1-m, with retail sales growing 8.1%. Like-for-like store sales grew 6.4%. Sportsmans Warehouse contributed sales of R499-m, which is 8.9% (8.1% like-for-like) higher than the same period the year before. Outdoor Warehouse sales grew 5.3% (1% like-for-like) to R149.5-m.

Sales in their Performance Brands wholesale division (First Ascent, Capestorm, etc) grew 1.1% — but sales to external customers dropped 7.3% to R28.6-m, while sales to stores in the group grew 4.8%.

There are 35 Sportsmans Warehouse and 20 Outdoor warehouse stores. During the period they closed the Sportsmans Warehouse in Amanzimtoti and expanded the Sportsmans stores in Cresta, East Rand and Tokai and reduced the Sportsmans store in Bloemfontein.

In the second half of the financial year they relocated four stores — the Sportsmans Warehouses in Klerksdorp and Windhoek and Outdoor Warehouse stores in Fourways and Bloemfontein. A 2 558m2 combined Sportsmans and Outdoor Warehouse store opened in Windhoek in November 2014.

They have already signed leases to open new Sportsmans Warehouse stores in George and Hillcrest.

The economy is negatively affecting higher price points in accessories and equipment, Mr Price Sport pointed out in their interim report. While their total retail sales grew 15.3% to R497-m for the 6 months period March-September 2014, comparable sales grew only 3.4%, and unit sales grew 5.2%.

During this period they opened 6 new stores and launched online in August 2014. They have 70 sport stores in South Africa. Mr Price Sport contributed 6.3% to the Mr Price Group sales of R4 582-m and 6.7% to the group’s 19.7% sales growth for the period. Sport sales, in two cross-border stores, comprise 1% of the group’s non-South African sales.

The group expects trading conditions to remain challenging well into the new year.

The Foschini Group (TFG) however, did not give separate results for the Sports Division in their 6-monthly Interim results. The group grew retail sales 9.7% to R7.3-bn, with cash sales now representing 44.2% of turnover.

During the past financial year ending 28 December 2014, Massmart grew sales 10.4% to R78.2-bn, but the reporting period was a week shorter than the previous year. Comparable store sales grew 7.5%. Massdiscounters (Game and DionWired) sales increased 10.2% (4.8% comparable) and Masswarehouse (Makro) sales grew 11.9% (10.7% comparable). Massmart’s full reviewed financial results were only available after we had gone to print.

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