By Lynn Bolin

Strong sales growth reported so far by six of South Africa's top retailers over the key festive season points to a continuing rosy outlook for the local retail sector, with one of the only downsides for earnings coming from price deflation in many categories.

So far Edgars Consolidated Stores (Edcon, ECO), Woolworths (WHL), Mr Price Group (MPC), Massmart (MSM) and New Clicks (NCL) have confirmed double-digit sales growth for either the three- or six-month period to end-December.

Only Shoprite (SHP) sales were somewhat disappointing, marred by the strike among part-time employees in October and November, which caused the food retailer to lose some market share to competitors.

The strongest sales performance to date has been recorded by Edcon, which saw overall sales rise by an impressive 21% y/y for the three months to end- December and 15% in December. Woolworths reported a noteworthy 13.7% y/y rise in sales over the six months to year-end, and Mr. Price also impressed with a sales increase of 13% y/y for the quarter.

Massmart sales were up 11.1% y/y (excluding acquisitions) for the six- month period, and New Clicks recorded 11% y/y growth for the September-December period, with 13% in December.

Shoprite still managed to boost sales 5.6% y/y for the six months, improving to 8.9% in December once the strike was concluded.

These performances have been more robust than the most recent official retail sales data would suggest. October real retail sales growth, as reported by Statistics South Africa, came in at 7.7% y/y versus 8.2% in September.

These figures account for inflation, but still do not include the high spending that accompanies the holiday season.

Other retailers expected to unveil their festive season trading performance in the near future are Truworths (TRU) and furniture and electronics groups JD Group (JDG) and Ellerines (ELH).

Analysts suggest retail stocks are likely be among the very best performers on the JSE Securities Exchange SA over the next 12 months due a continued healthy outlook for consumer spending. Among the threats to their forecasts are a continuing stronger rand and further falls in inflation, which could further erode their margins.

A deflationary environment, such as that seen over the past few months,demands lower costs or higher sales volumes - or both - from retailers, as well as faster stock turns.

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