Sales carnage for SA retail
RETAILER Massmart reported a sharp slowdown in half-year sales growth yesterday — further evidence of the corrosive effect of South Africa’s recession.
This followed tepid results from Woolworths last week, the collapse of the Stuttafords department store chain last month and weak apparel retail sale figures from TFG and Mr Price in May.
Massmart, a unit of the US’s Wal-Mart Stores, said total sales rose 0.5% to R42.5billion in the six months to the end of June, as weak consumer spending weighed on its business.
Sales increased 8.7% in the same period last year.
Massmart’s home market and largest revenue source, South Africa, slumped into its first official recession in eight years during June, with political turmoil sending business and consumer sentiment to multiyear lows.
The company, which sells food, general merchandise and household appliances in 13 African countries, said its comparable stores sales decreased by 1.6%.
Consumer spending was weak, especially on discretionary items, it said.
While food and liquor sales rose 3%, general merchandise, home improvement and mobile device sales decreased 2.9%.
Woolworths last week cited difficult trading conditions as it flagged a lower full-year profit.
Difficult trading condi- tions squeezed the group’s growth hopes. Investors have lowered their expectations as the outlook for the retail sector continues to deteriorate.
Woolworths’ share price has been pummelled, losing 27% over the past year.
It also reported a 3% increase in group sales compared with the year-earlier period.
Shrinking sales were a big concern for a business with a relatively large cost base, Lentus Asset Management chief investment officer Nic Norman-Smith said.
“The majority of local retailers have invested heavily in expanding their store space.
“This is beneficial in a buoyant environment but, when the cycle turns, the negative operational gearing can be detrimental to the bottom line,” he added. —
‘ Outlook for the sector continues to deteriorate