Reaching critical mass

There’s no doubt that the local retail market is decidedly red in tooth and claw at present, with punters looking in the cracks of the sofa to find a little disposable income to supplement the gaping void in their wallets.

This means retailers will be slashing margins to the bone as they chase what little spending there is to be had, and while it may dent performance across the board in the short term, going all Darwinian will benefit the strongest operators as they wave a tearful farewell to the weak.

Massmart is undoubtedly a robust operation, but it hasn’t covered itself in glory in the past year.

Clearly the major issue was the macro retail environment, but of the matters that were in its direct control, the decision to move the head offices of Massdiscounters and Masscash up to Joburg from Durban had a considerably disruptive effect in the period.

The move is expected to result in R52m of annualised savings for the group, and there is clear logic in having senior leadership in one place, but it appears to have gone down badly with fans of a sultry tropical climate and easily accessible surf.

The company remains cautious about the outlook for the SA retail environment, and is stepping up its march into Africa, concentrating on opportunities in Kenya and Zambia. It is looking to expand and refine its online presence, where sales grew by 56% in the year.

The good news is that its exceptionally low cost base will allow it to bounce back when the local consumer market picks up.