JD Group Warns South Africa Consumer Spending to Remain Weak
JD Group Ltd. (JDG), a South African furniture retailer and financial services provider, said high unemployment and an oversupply of unsecured lending is causing consumers to spend less on durable goods.
“With our target market under pressure, it’s been very difficult for furniture sales,” Chief Financial Officer Bennie van Rooy said in a phone interview today. “Customers are protecting their day-to-day expenses, which means they are spending less on items such as furniture and defaulting more on repayments.”
JD Group’s net income rose 3.5 percent to 502 million rand ($56.6 million) in the six months through December, the Johannesburg-based company said in a statement yesterday. Its furniture business had no sales growth in December, although sales improved in January, showing “mid-single digit sales growth,” van Rooy said.
South African retail sales growth weakened in December as high unemployment and rising inflation curbed consumer demand. Inflation rose to 5.7 percent in the month.
Shoprite Holdings Ltd. (SHP), Africa’s largest food retailer, said on Feb. 19 that increases in the price of fuel and power in South Africa coupled with labor unrest will hold back consumer spending in the first six months of 2013. Retailers Truworths International Ltd. (TRU) and Edcon Holdings Pty Ltd. also warned of a weak consumer environment this week.
Ability to Afford
“Our credit acceptance rate fell to 65 percent, from 68 percent last year,” JD Group’s Van Rooy said. “This is an indication of consumers’ ability to afford our average loan size of 7,000 rand.”
The company said yesterday that Chief Executive Officer Grattan Kirk resigned, to be replaced by David Sussman. Kirk will continue to work with JD Group’s retail division “wrapping up” projects that were started during his tenure as CEO, Van Rooy said.
JD Group rose 1 percent to 41.50 rand by the close in Johannesburg, compared with a 0.9 percent drop in the 11-member FTSE/JSE Africa General Retailers Index.
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