Massmart shares on the rise after boom in sales
Group’s market value is more than R31bn
MASSMART shares rose nearly 10 percent on the JSE yesterday after the retail giant reported a boom in sales despite depressed consumer spending in South Africa.
Massmart shares rose 10.28 percent on the JSE yesterday to close at R145.25, taking the group’s market value to R31.54 billion against the difficult trading conditions in the country.
The company yesterday reported an almost 16 percent rise in profit during the full year to December.
Massmart chief executive Guy Hayward said the group would now focus its strategy on growing its portfolio outside South Africa in order to supplement low customer spending in the country.
Hayward said the company would roll out 11 new stores outside South Africa as part of the strategy.
“We will be adding 26 percent to our African space in the next two years,” Hayward said.
He said the local market had been affected by economic pressures such as inflation, drought and higher debt-servicing costs.
He said the severe drought in southern Africa, and weak and volatile African currencies, impacted rand sales and also impacted on its performance in the rest of the continent.
Massmart said despite the problems, its total sales increased 7.7 percent during the period, while headline earnings improved 15.6 percent to R1.3bn.
Subdued spending
Total food and liquor sales grew 11.7 percent during the period, while general merchandise grew 1.5 percent as a result of the subdued consumer spending.
Haywood said group sales outside South Africa represented 8.7 percent of total sales.
However, Hayward said despite the challenges, the group said it ran a number of successful promotions to boost its sales. He said one of its stores, Game, experienced its highest ever one-day sales on Black Friday and Makro broke all previous on-line records, generating the highest on-line sales on that day.
Hayward said: “This is noteworthy, given the group’s exposure to general merchandise, which has been significantly impacted by low levels of discretionary consumer spending.
“These results also reflect our emphasis on enhancing business efficiencies, which we will continue in 2017 as we maintain our focus on leveraging our group transport, logistics and supply chain.”
Hayward said he remained hopeful that several key economic drivers in South Africa would improve this year, including lower food price inflation, rand strength and possibly lower interest rates.
“This makes us cautiously optimistic for the upcoming period,” he said.