Welcome to our newsletter that provides commentary on major themes emerging from the Insights dashboards. This month, we're giving you an early look at festive spending trends before the retailers release their own trading updates...  

Go to the dashboards

As we described in this week’s 

Nugget

, November and December are especially important months for retailers. In certain categories, combined, they account for nearly 25% of annual spend, even though they comprise only 17% of days in the year. 

It’s common for listed retailers to provide trading updates to the end of December – these announcements are likely to start being published next week. To get ahead of the game, we’ve analysed the debit and credit card transaction data of a large sample of real consumers to estimate the spending growth that these retailers may announce over the coming weeks. 

In general, our data shows that consumer spending growth continues to weaken. Spending growth slowed in December in most categories. There were some categories (like Eating Out, Pharmacy and Grocery) that increased ahead of total spending growth, but others (like Apparel, Media and Home) lagged behind. Across all categories, spending on Apparel slowed most in December.

December 2022 saw much higher rates of spending growth, making it harder for consumer-facing companies to maintain their growth momentum, especially since the trading environment hasn’t become any more favourable.

Growth in spending by category (22seven users)

A Black Friday to Remember Two significant milestones for retailers in November

In the previous Shop Talk

, we noted that 22seven user spending at Chinese online fashion retailer Shein surpassed spending at Mr Price clothing for the first time. Granted, it was November and Black Friday, but there are clear signs that market share within the Apparel category is shifting. Against this backdrop, and against weakening spend in Apparel in general, the diversification benefit of homeware divisions within the major apparel retailers is offering contrasting results. 

Consider the Mr Price Group. In the top panel of the chart below, we’ve tracked total spending growth alongside spending growth in the group’s apparel businesses: Mr Price, Mr Price Sport and Milady’s. Growth in total spending lagged apparel spending from July 2022 to July 2023, representing weaker performance by the group’s homeware brands: Mr Price Home, Sheet Street and YuppieChef. However, the gap has narrowed over the past six months, indicating that those same homeware brands are buffering the group from the impact of a weakened apparel market.

In contrast, the middle panel of the chart shows how a strong performance from TFG’s homeware brands (Tapestry, @Home etc.) during the earlier period boosted overall group performance, but this effect has reversed in recent months as the gap between apparel and total spending growth has widened.

Finally, in the bottom panel, we show how Truworths – with a much smaller homeware business – is more exposed when it comes to the weaker apparel market. Our data reflects a sharp deterioration in spending growth at Truworths since it last provided a trading update.

Data enthusiasts perusing the Insights 

dashboards

 might be alarmed to see that Checkers lost market share among 22seven users during December. However, this decline is fully attributed to Sixty60: like most of its delivery competitors, it lost market share during the month. 

On an annual basis, and in the context of a slowdown in grocery spending, the rank of retailer by growth rate is unchanged in December.  Checkers continues to lead the market, followed by Woolworths. Based on our data, Spar and PnP are trailing and losing market share. 

With Pick n Pay’s market value dipping below R10bn in early January, our spending data shows no urgency to back a turnaround. Despite a much better performance from their asap! service, there’s no incremental evidence of an improvement in growth. In fact, overall spending growth at PnP dipped further in November and December. 

Grocery spending growth (22seven users)

In anticipation of January trading updates from the major retailers, one method of consolidating the info gained from spending growth data is to compare spending growth with share price movements. 

There are many ways to do this. In the chart below, we contrast the change in share price since early December (45 days; relative to the JSE General Retail index) with the three-month, year-on-year growth in spending. We provide this for each retail brand and its listed parent. For example, you’ll notice that PnP supermarkets (PIK – PnP) is shown separately from Boxer (PIK – Bxr) to highlight differences within companies. We do the same for Shoprite and Pepkor. 

In this view, we’d expect points to be clustered along a diagonal trendline through the origin. (We’ve plotted this to make it less imaginary.) While there are other permutations of period and metric that could be plotted, and a multitude of other considerations to take into account, our attention is focused on the companies and brands that lie furthest from the straight line.

Clients are welcome to request the underlying spreadsheet to evaluate their own permutations of data in this chart.

Lastly, if you’re a media company reliant on a sports audience, it may be hard to grow when the past 11 months have included three major world cups!

For instance, annualising the dividend from the FIFA World Cup in late 2022 seems to have meaningfully knocked spending on Showmax in November and December 2023. For spending in this category to return to growth, we may need to wait until the end of 2024 for the benefits gleaned from the rugby and cricket world cups to have fallen out of the base period. Especially considering that spending on DStv weakened during the last six months, notwithstanding the boost from the two world cups, which has dragged overall spending in the category lower. 

Spending growth on media and streaming services (22seven users)

The 22seven Insights dashboards offer investors and retailers a detailed, real-time view of the aggregated spending decisions of more than 50,000 actual consumers across South Africa. 

Insights tracks spending across seven major categories such as Food, Apparel, and Home. Every major category is further segmented into sub-categories, and a specific dashboard is available for each one. We have updated and expanded the dashboards and we’ll continue to do so over the next few months. 

The dashboards provide a market overview that includes changes in market share for each retailer, as well as an estimate of growth in user spending. Users are segmented into six income brackets that allow for detailed tracking. In addition, the dashboards include five years of historic information and other metrics, such as average transaction value and median monthly spend per user. 

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