The ‘rich’ are feeling the pinch too

Connie Queline

The ‘rich’ are feeling the pinch too

Reported sales numbers from Woolworths, particularly its Food business, are a very useful indicator of where the market is for upper-income consumers. These households are more likely to do their grocery shopping at Woolies than elsewhere.

So, when the group says that same-store sales grew by 7.2% in the half-year to Christmas Eve, trading looks to be ‘fine’. Except selling price inflation was 9.1% in the six months, meaning volumes are down about 2% year-on-year.


Read: Woolies online food sales surge over 40%

Look around you next time you’re in Woolies. Basket sizes are smaller; those monthly shops are now for half a trolley of groceries, and any nice-to-haves are very carefully considered, if at all.

One could say that it’s just poor merchandising, but the amount of festive gifting stock (think fancy chocolates and biscuits) left unsold in Food stores was noticeably higher than in previous years. 

You best believe it’s not just the middle class – more affluent customers in South Africa are feeling the pinch, too. 

(In truth, the performance of Woolworths’s Fashion, Beauty, Home segment in the last six months was even worse. Comparable sales were up 1.5%, with price movement of 11.4%. In volume terms, sales were down nearly 10% from 2022!)

Its Woolworths Financial Services joint venture with Absa has seen the impairment rate for what is effectively a store card jump from 4% to 5.5% to 6.3% over the last three years.

Not just Woolies

Updates from TFG Limited, Truworths and Mr Price in the last week have painted a similar picture, but detailed results in the next five months will provide more accurate data points. 

Between October and December, TFG Africa’s homeware division – bolstered by the acquisition of Tapestry brands in 2022 – grew sales by just 0.9%. Tapestry added Coricraft, Granny Goose and Dial-a-Bed to its existing @home brand, targeting the upper end of the market. Cosmetics sales were up 3.4%, while sales in its jewellery category declined by 2.6% in the quarter. Factor in inflation, and volumes are down in these discretionary categories. 

Mr Price, too, saw sales up 0.9% in its home segment. (Yuppiechef is the exception that proves the rule with “double-digit” growth.)

Truworths – arguably more exposed to the ‘middle class’ than the affluent customer – saw like-for-like sales in November and December decrease by 3.3%. Retail selling price inflation was 8.4%, meaning volumes declined by nearly 12%. 

TFG’s sales growth slows in Christmas quarter
Truworths warns on half-year profit
Mr Price hits 52-week high on Q3 sales bump

These data points show trading performance towards the end of last year, with particularly severe load shedding in the first half of September and the latter half of November. Even Black Friday was something of a damp squib last year when compared to prior ones (likely due to Stage 6 power cuts). 

However, ‘affluent’ households have not seen their wealth keep up with inflation for a number of years now. 


Anaemic growth

President Cyril Ramaphosa memorably referred to his predecessor Jacob Zuma’s term as a ‘lost decade’. The thing is, for the first few years (first half?) of Zuma’s presidency, things were still going well. The rot set in later, and we can see the evidence of this every single day: Eskom, Transnet, the multitude of other state-owned enterprises, failing or collapsed municipalities … and the absence of anything to stimulate economic growth. All of this translates into anaemic growth – an economy that is basically standing still. 

Last year, the JSE All Share delivered a return of 2.9%. The JSE’s midcap index, mostly a collection of ‘SA Inc’ stocks – surprisingly – generated a ‘better’ return, but this was only 4.31%. Anyone with the means to has externalised much (most/all?) of their wealth. 

JSE vs international markets: Not a pretty picture
Logistics crisis: Neighbours eat SA’s lunch

One can see this in the divergent performance of FNB’s House Price Index. Average house price ‘growth’ in Q3 last year for properties between R5.5 million and R7.5 million was -14.7%. Generally, the prices of any house over the R2.5 million mark have seen double-digit declines in recent quarters. 

Perhaps the most damning statistic of all, which perfectly illustrates the shrinking of South Africa’s ‘affluent’ class, is that the BMW Group* (BMW and Mini) sold half as many new vehicles in the country in 2023 as it did a decade ago (13 679 vs 27 671).

The decline hasn’t been exactly linear, with a 37% drop between 2013 and 2018. In the last five years, sales are ‘only’ down 21%. 

Not even 350 000 new passenger vehicles were sold in the country last year. In 2013, over 100 000 more were sold. 


Just over half a million vehicles sold in SA in 2023
New vehicle discounts abound as dealers try to boost sales
Trading outlook fragile as festive sales disappoint

* Mercedes-Benz resigned from automotive business council Naamsa in 2012, making BMW Group the only realistic bellwether for the affluent segment (Audi’s sales are folded into the VW group). 


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