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South African retailers enjoyed good Christmas sales as consumers continued to spend on credit despite four rate hikes in the past year, analysts have said.
One striking trend during the Christmas period was the amount of credit still being dished out to consumers, Metropolitan Asset Management portfolio manager Sandra Nyathela said. "Everyone has been getting on the bandwagon before the National Credit Act comes into play," she said.
South Africa is set to introduce the National Credit Act in June, which aims to make it significantly more difficult for banks, retailers and other providers of credit to sign up new borrowers.
In October, furniture retailer JD Group warned that the act and rising rates would dent disposable income levels.
Faced with rising inflationary pressures, Reserve Bank governor Tito Mboweni hiked rates four times last year and is expected to up them by another 50 basis points in February.
Over the past couple of years, retailers have benefited from record consumer confidence levels, spurred on by historically-low interest rates and an emerging black middle class.
Nyathela said she expected good earnings from all the listed retailers but could not pin-point one retailer that performed exceptionally well. "Across the board, everyone has benefited," she said.
In November, fashion retailer Truworths and wholesaler Massmart said they were positive about the peak Christmas period.
While a further rate hike could raise fears about bad debts at many big retailers, this should not be a concern for Durban-based cash retailer Mr Price.
Although Mr Price's cash status protects the firm from bad debt worries, Abri du Plessis, chief investment officer at Gryphon Asset Management, said the retailer would fare worse than its peers in a low-confidence environment. "People stop buying when confidence levels fall off and cash retailers feel it much more with no annuity income coming in from the debtor books of credit retailers," he said. - Reuters