Massmart not sitting pretty despite higher sales figures |
MASSMART’S share price declined by almost 7 percent on the JSE after the retail group reported low sales growth in the year to end December. Massmart reported a 2.9 percent increase in sales to R90.9 billion, while total sales from the group’s South African stores increased by 2.9 percent and comparable store sales grew by 1.5 percent.
South African store sales generate 91.3 percent of group sales.
The retail sector has been under pressure as a result of the sluggish economy in the country characterised by low gross domestic product and wage growth, and constrained consumer confidence. The group said gross margins declined slightly from 19.63 percent to 19.45 percent, primarily as a result of pressure in Game, although this was offset by higher retail participation at Massbuild.
“Once again, expense management remained effective with comparative expenses, excluding restructuring costs, increasing by 2.3 percent,” the group said. Group trading profit before interest and taxation, excluding restructure costs, declined by 16.8 percent to R2.1bn, while headline earnings decreased by 31.7 percent to R901.2 million. Headline earnings excluding restructure costs decreased by 22.9 percent to R1bn.
After the release of the results, the group’s share price declined to R80.48 a share, down from Wednesday’s closing price of R93.10. Chief executive Guy Hayward said the retailers in the country were having a tough time as they also report declining numbers.
“We are yet to recover from the two quarters of recession which we experienced last year,” Hayward said.
Early in the week another retailer, Cashbuild, also reported an 11 percent decline in headline earnings per share.
The group said despite the difficult environment Massmart maintained a strong market share across durable goods categories, including small and large domestic appliances, hi-tech and most DIY and hardware categories.
The group’s omni-channel focus, designed to improve customer choice and experience, saw aggregate online sales increasing by 56 percent.
Massmart’s four e-commerce points of presence in Makro, Game, DionWired and Builders Warehouse registered growth of 74 percent in online traffic. The group continues to invest in driving online sales and all four of these platforms are currently using or migrating to SAP Hybris.
Massmart comprises four divisions operating in 436 stores, across 13 sub-Saharan countries.
Total sales from the group’s stores outside South Africa grew by 3.9 percent in constant currencies. Hayward said the overall results reflected a challenging operating environment in which they are resolutely focused on those factors within their control. “This is demonstrated by good expense management, 61 percent growth in value-added services and 56 percent growth in online sales,” Hayward said.
Massmart shares closed 6.43 percent lower at R87.11 on the JSE yesterday.