Bruce Whitfield:
The latest retail company trading update came out from the retailer Edcon, with sales growth across the group up 21 percent for the last quarter of last year. It includes, of course, that crucial Christmas period, and Steve Ross, the chief executive of the Edcon Group is with us now. Steve, was Christmas better than expected?

Steve Ross:
Yes, I suppose it might have been a little bit stronger than we expected. But you know we plan these things pretty carefully. We?ve been saying to the market that we?ve expected continued consumer strength over time. We didn?t expect quite the sort of strength that we?ve had in the past. Last year this time for the same quarter, we were up 24 percent, and this time we?re up 21 percent. So that may be tempering a little bit, but we?re very pleased with these numbers. The base was huge.

Bruce Whitfield:
The base, and that is the point, because the message that came out from the Reserve Bank in December regarding the inflation outlook, the economic outlook was far more positive than it had been in October. That?s got to be good news for you going into this year.

Steve Ross:
Oh, very good news, but we?ve also been fairly consistent in being, I guess we call it cautiously optimistic, that the conditions of the economy are ideal for consumers, and they seem to be able to continue to be ideal for some time to come.

Bruce Whitfield:
One thing that leapt out of your trading update today, was a big difference in the inflation experience of Edgars versus one of your other brands, Jet. Edgars saw inflation of three percent, and Jet saw deflation of 18 percent. That?s a huge gap.

Steve Ross:
It?s a huge spread, but it?s also not inconsistent with what has happened over the last two or three reporting periods.

Edgars, at three percent, it?s a fairly neutral number. 18 percent in Jet is about positioning a value price discounter at the right prices. So, where we have an opportunity to pass savings that we can find in the market along to consumers, we do. That?s what you?re looking at.

What we told the market is that we thought that this would be the last half where this would be as big as it is. We?re expecting by end of this year, that it will sort of level out. Because we?ve done the price positioning now that we need to do.

Bruce Whitfield:
Is it because you source different quality products from different parts of the world?

Steve Ross:
No, it has nothing to do with the quality of the product. It?s just that we merchandise the price point. And as a value retailer, Jet needs to have goods at very sharp prices to be appealing to the maximum amount of customers. You can see with the numbers there that Jet was up 17 percent, and JetMart was up 53 percent. So obviously we?re appealing, and when you consider that embedded in both those numbers, and specifically that Jet number is this 18 percent deflation, well obviously then the growth is considerably higher than the 17 percent. The unit growth.

Bruce Whitfield:
Absolutely, and the margins aren?t quite as good in cellphones as they are in clothing, but surely the cellphone story has got to be one of the surprise retail phenomena of the 21st century so far.

Steve Ross:
No, it is, and it keeps exceeding our expectations. We didn?t expect in the first half of the year. Back in November, we were up 52 percent for the first six months, and we?ve really grown at pretty much that same pace through the third quarter. So it?s quite the phenomenon.

Bruce Whitfield:
With the popularity, we?ve seen the success of cellphones, might you go the route of iPods, for example, as they are almost fashion accessories themselves.

Steve Ross:
Well, they certainly are, and I would love to go the route of iPod, if I could find enough supply. We sell a few iPods at CNA, but I believe we could sell a lot more if we could just get our hands on the product.

Bruce Whitfield:
Would you consider spreading those into, say, the Edgars chain as well?

Steve Ross:
Yes, it?s a consideration, for sure. We?d start with CNA, but it?s certainly a consideration. It would conform to the consumer demographics, for sure.

Bruce Whitfield:
What about the bad debt experience? I?ve noticed that that seems to be ticking up just fractionally.

Steve Ross:
Yes, just fractionally, and by design, a little bit. We?ve been very aggressive in adding new accounts to our books, and basically that comes with some risk attached to it. We said that we would be happy at an able to purchase number of about 85 percent. We?ve come down from 89 percent to 87 percent. So we still have some room to move, if we?d like. We?re not concerned about that debt. It?s very well managed, and the tools that we use to manage it today are significantly different than they were six or seven years ago.

Bruce Whitfield:
You?ve long been a proponent of the consumer cycle — the stronger for longer consumer cycle. You alluded to it earlier. You?ve been very accurate in your forecasts now. How do you read that consumer cycle as it stands at present?

Steve Ross:
I think the conditions for consumers remain very good. Interest rates are very low, and seem to be continuing to be low for some time to come. There are real wages coming into the economy — real wage growth, vis-a-vis inflation. And there?s a lot of commitment from government to spend on infrastructure, and to get a GDP of over six percent, and I think that bodes well for consumers.

Bruce Whitfield:
If this was a house party that started at six o?clock in the evening and was planning to end at six o?clock in the morning, what?s the time?

Steve Ross:
I?m hoping it?s about half past ten.

Bruce Whitfield:
Are you that optimistic?

Steve Ross:
No, not quite that optimistic. I really, we told the market that we don?t see anything as an impediment through to the 2010 World Cup, though.

Bruce Whitfield:
And that certainly is very positive. Steve Ross, the chief executive officer of Edcon, on the line to us from Johannesburg.