JD Group Says Customers Buying Less Furniture on Bad Debts

JD Group Ltd. (JDG), South Africa’s biggest listed furniture retailer and a provider of unsecured loans, said high unemployment and an excess of unsecured lending is causing consumers to spend less on durable goods.

“Subdued consumer demand, prevalent throughout the period, worsened during the 2013 festive season, negatively impacting merchandise sales of household goods during the group’s peak trading period,” the Johannesburg-based company said in a statement today.

JD Group reported a net loss of 138 million rand ($12.5 million) for the six months through December, compared with a profit of 502 million rand a year earlier. It increased its provision for bad loans by 66 percent to 1.6 billion rand. That represents 15 percent of the loan book, up from 9.9 percent a year earlier.

South African retailers have been struggling over the past year as an unemployment rate of 24 percent and high inflation hurt consumer spending, with those that take credit sales particularly vulnerable. Retail sales growth declined to 3.5 percent in December, compared with 4.4 percent the previous month, while South Africa’s Reserve Bank raised borrowing costs in January for the first time since 2008.

JD Group shares gained 1.4 percent to 25.40 rand as of the market close in Johannesburg. The stock has declined 12 percent this year, compared with a 1.9 percent rise in the FTSE/JSE Africa All Share Index. It slumped 6 percent on Feb. 11, when the company said it would make a first-half loss and planned a rights issue to help shore up its balance sheet.

JD Group has “adopted a more prudent provisioning approach as a result of the deteriorating credit quality in both the secured and unsecured lending market,” it said today. The company’s acceptance of credit applications fell as a result.

To contact the reporter on this story: Janice Kew in Johannesburg at jkew4@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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