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Massmart grows sales 9.5% despite ‘intense’ competition

27th May 2015

By: Natalie Greve

Creamer Media Contributing Editor Online

  

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Suggesting market-share gains by the retail group, Massmart CEO Guy Hayward reported on Wednesday that the company had managed to grow its sales by 9.5% in the first 20 weeks of this year, despite “intense” competition in the retail sector.

Comparable sales grew 7.4% over the period, with year-to-date sales inflation of 3.9%, while Massdiscounters, which operated outlets Game and Dion Wired, saw total sales growth of 10.5%, he noted in a post-annual general meeting statement.

In South Africa, Game retained strong comparable sales growth of 6.8%, which flowed largely from improving operational execution and clarity on its merchandise range and offering, helped by a soft base in the prior year.

“Pricing remains extreme as players fight for share, and so, while we are seeing margin recovery in Game, it is not as strong as might be expected. Trading across most African countries is tough for diverse reasons, but common factors include lower resource prices and dollar strength,” he commented.

In Game Africa, total rand sales growth was 9.1% and comparable sales growth 1.2%, while Dion Wired grew sales by 6.1% over the period. 

Bulk retailer Makro performed “well”, with total and comparable sales growth of 11.6% and inflation of 4.4%.

“Retail execution is superb and an upper-income orientation may also be assisting. Our retail food participation continues to grow and there is severe price-pressure in wholesale, led by intense competition and deflation in commodities,” said Hayward.

Home improvements retailer Massbuild grew total sales by 15.5% and comparable sales by 11.6%, with inflation of 5.4%.

“Customers continue to support this powerful retail format and all four of our brands are performing strongly, showing further market-share gains. Sales growth in our five stores in Botswana and Mozambique remains very strong,” he noted.

In Masscash, total sales growth from the wholesale division was 2.8% and comparable sales growth 2.9%, with inflation of 3.9%.

As seen in Game, trading conditions in the group’s Africa wholesale stores remained “tough”, with total sales growth of 4%.

Cumulatively, these pressures could cause this division’s earnings to be below last year, Hayward cautioned.

In the retail division, total sales growth was 12.5% and comparable sales growth 7.6%.

He, meanwhile, noted that the “disturbing” recent xenophobic outbreaks had caused sporadic disruptions to both Massmart and its customers’ trading.

“Local and foreign small traders make the South African lower-income informal sector vibrant and they trade at exceptionally low margins, thereby benefiting their customers,” he commented.

Hayward added that he was encouraged by a recent announcement by Economic Development Minister Ebrahim Patel that there would be an official inquiry into, besides other matters, tenancy arrangements in shopping malls.

“Some major food retailers continue to defend lease exclusivities, thereby inhibiting competition and in some cases preventing smaller businesses from entering shopping centres.

“Regardless of how these restrictions may be characterised by the major retailers, we believe them to be intuitively anticompetitive,” he asserted.

Looking ahead, the group would remain focused on its strategic objectives of improving profitability and growing the food and the do-it-yourself segment in South Africa and Africa.

The company expected to open six new stores in Africa and 19 new stores in South Africa this year, representing net space growth of 3.9%.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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