Fitch: South Africa retail remains weak

Fitch Ratings said the outlook for South Africa's retail sector remains weak as the economy continues to contract in 2009.

Fitch said in a special report it believes a sustained recovery for the broad retail sector is unlikely before 2010.

Retail companies in South Africa still face difficult trading conditions through 2009 and into 2010 despite an expected lower interest rate environment, the agency said.

The agency said it believes credit profiles remain at risk in the economic downturn with the durable and semi-durable segments most susceptible to negative rating actions.

In the face of declining sales, the increased challenge to sustain profitability and liquidity management will likely put retail corporate ratings under pressure, particularly for retailers that maintain more aggressive capital expenditure program, Fitch said.

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