Sales car­nage for SA re­tail

The Times (South Africa) - - BUSINESS -

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

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