Massmart releases weaker than expected sales update

Massmart releases weaker than expected sales update

A Game store, operated by Massmart, in Rosebank, Johannesburg. Picture: SUNDAY TIMES
WALMART-owned Massmart on Tuesday released a weaker than expected update, saying sales grew 8.9% to R32.3bn in the 26 weeks to June 23. Comparable store sales increased 5%.

Moderate retail trading conditions are expected in 2013 as consumers trade down due to debt pressures, escalating costs, higher inflation and a lack of job creation in Africa’s biggest economy.

Product inflation for the period was estimated at 2.9%, the company, headed by CEO Grant Pattison, said.

Sales at Masswarehouse, which operates its Makro warehouse stores increased 13.6% and 6.9% on a comparable basis.

Massdiscounters, which operates two retail formats, Game and Dionwired, saw sales rise 9% (3.7% on a comparable basis).

Absa Investments analyst Chris Gilmour said overall he was not impressed with the group’s numbers.

“Massdiscounters was the worst performer, however if you look at what’s happening in terms of big ticket items at the likes of Lewis Group and JD Group there is a similar type of pattern materialising.

“The performance reflects the difficulty that consumers are facing when it comes to spending on discretionary items. People just don’t have the money to spend, and with credit being reined in by banks and retailers, its making it more difficult. The Masswarehouse division’s performance wasn’t bad,” he said.

At Massbuild — which trades in DIY, home improvement and builders’ hardware under the Builders Warehouse, Builders Express and Builders Trade Depot brands — sales grew 9%. Meanwhile, Massmart’s food wholesale business Masscash grew sales 5.5%.

Retail sales growth remained subdued during the second quarter on the year‚ according to the latest EY/Bureau for Economic Research (BER) retail survey released last month.

While clothing and footwear sales volumes remained solid‚ sales of furniture and household appliances and non-durable goods such as food‚ beverages‚ tobacco products and cosmetics disappointed during the period.

According to Derek Engelbrecht‚ retail and consumer products sector leader at EY, whereas the growth in household consumption expenditure was the mainstay behind the domestic economic recovery since the recession‚ the growth in consumer spending was expected to be subdued and much less supportive of economic growth during the remainder of this year.

“Both real income growth and credit extension are expected to slow further on the back of weak global economic growth and the debilitating impact of seemingly relentless social unrest and industrial action‚ high household debt levels and deteriorating business and consumer confidence levels on the domestic front‚” Mr Engelbrecht said.

Global retail giant Walmart acquired a 51% stake of Massmart in 2011. Massmart’s results for the period are due to be released on August 22.


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