Massmart bashed by subdued consumer spending

MASSMART is battling as a result of subdued consumer spending, increasing job losses and the high unemployment rate in the country, with its interim results reflecting the pinch.

The high debt levels by consumers have resulted in a cutback on spending, which has negatively affected most retailers. Massmart chief executive Guy Hayward said yesterday that the past six months ranked among the most difficult trading conditions retailers had faced in recent memory.

“The challenging consumer environment demanded an intense focus on expense control and I am pleased that this resulted in a reduction in comparable operating expenses, which were 1 percent lower than the prior period,” Hayward said. In the six months to end June, the group reported a 0.5 percent increase in total sales to R42.5 billion, while headline earnings increased 2.5 percent to R328.6 million.

Massmart is Africa’s second largest retail group and it comprises four divisions, operating in 415 stores, across 13 sub-Saharan countries. It owns local brands such as Game, Makro and Builder’s Warehouse.

Despite these challenges, the group said that there were positive signs in the results. The group said it has achieved market share gains in key categories including DIY, as well as small and large appliances.

“We also delivered good traction in online sales with Makro and DionWired recording online sales growth of 48 percent and 24 percent, respectively.

“Makro Liquor online sales grew an impressive 84.7 percent and the newly acquired WumDrop will enable same day delivery capability for Makro,” Hayward added.

The group said the recently launched Builders site attracted 30.3 percent more users, with click and collect rolled out to 32 stores in six provinces, while page views are up 240 percent since June 2017.

The group’s Massdiscounters division consisting of Game and DionWired saw total sales decreasing by 1.4 percent and comparable sales declining 3.5 percent, with product inflation of -0.3 percent.

Masswarehouse division saw its total sales increasing by 4 percent and comparable sales grew by 1.5 percent, with product inflation of 3.9 percent. Total sales growth in food and liquor was 6.9 percent.

Massbuild division remained flat despite total sales growth for the period.

Suvasha Kander, afund manager at Ashburton Investments, said the results were poor amidst a weak trading environment and subdued consumer spending.

“Sales were flat overall, but the South African operations performed better than the rest of the continent as a result of currency weakness. Notably, expenses were well-contained,” Kander said.

Massmart shares showed a slight rise of 0.13 percent to close at R125 on the JSE yesterday.