Christmas trading for SA’s retailers proved fair to middling, with more of the same expected as the year goes on.

 For most of last year, retailers targeting the lower-middle income segment bore the brunt of weak consumer demand.

While there is some respite on the cards thanks to the big drop in the oil price, consumers’ ability to spend will still be tempered by indebtedness and unemployment.

Portfolio manager at Momentum Wayne McCurrie says the festive season updates of retailers in SA were "reasonable". "Some, like Truworths disappointed but in total they were a bit better than what the market was expecting. They were definitely not fantastic though," he says.

Consumers have struggled to service their debt timeously, weighing more on credit-reliant companies such as Truworths and furniture groups such as Lewis and JD Group, which have fared far worse than cash players such as market darling Mr Price.

Truworths’ retail sales in the 26 weeks to December 28 were 0.8% down from the previous year when stripping out the effect of new stores.

The company sells more than 70% of its merchandise through store credit, making it particularly vulnerable.

Same-store sales by rival The Foschini Group (TFG) rose 5.1%, up from 4%. The retailer has been aiming for a 50-50 split between credit and cash sales to reduce the effect of card defaults.

"The cash guys are still better placed but credit retailers are actually better off than they were last year. Inflation is going to about 4% over the next couple of months, (and) there is a fairly good chance we will have an interest rate cut this year… last year we were looking at increasing interest rates — there is no chance of that for a long time in SA," Mr McCurrie notes.

Walmart-owned Massmart surprised with a decent performance across all divisions except lower-income focused Masscash.

Even serial underperformer Game, which sells general merchandise and durables, showed signs of improvement.

For its six months to December Shoprite’s turnover grew 12.5% to R57.5bn‚ with same-store sales up 5.1% — roughly in line with market expectations.

Group economist at Investec Annabel Bishop says last year consumers faced higher interest rates, and so higher debt repayments. Real disposable income after tax growth was on a downward trend and this will likely continue this year, as well as weak private-sector employment prospects. "We expect consumers will continue to de-leverage over 2015 for the same reasons."

Woolworths took a bit of pain — food and clothing sales grew at a slower pace on a like-for-like stores basis in the 26 weeks to December 28 compared with a year ago.

Its performance was, however, boosted by its R23.3bn takeover of Australian department chain David Jones and Australian unit Country Road.

With upper-income spending in better shape, analysts expect the group to be resilient as its supermarket strategy continues to see it taking market share from Pick n Pay.

"Some relief is… expected on the collapse in commodity prices, with the exogenous price shock of a halving in the oil price already feeding through into markedly lower petrol prices.

"In the absence of the government clawing back the petrol price cut relief to bolster its tax coffers, consumers will gain some improvement in spending power, which will be much needed as the traditional festive season binge will leave already highly indebted households financially constrained in the new year," Ms Bishop says.

The falling oil price and petrol prices are extremely significant for the South African consumer, Mr McCurrie says.

"When you fill up a tank now, compared to last year you have R200-R300 more in your pocket," he said.

"It will last most of the year… the oil price might go up to about $50-$70 but not in the short term, because there is a proper price war between Opec (the Organisation of the Petroleum Exporting Countries) and the American shale gas producers," he said.

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