Massmart CEO Guy Hayward on Thursday said the company expected to report “disappointing” results for the first half of the year, as any green shoots in the economy – the drought ending, a stronger rand, potentially lower interest rates, and improvements in the Reserve Bank’s leading indicators – were “washed away” by the negative economic impact of political events in late March and April that culminated in the downgrade of South Africa’s sovereign debt.
“The unfavourable impact on sales in discretionary product categories, such as general merchandise, has been notable and appears to be as strongly linked to weak consumer confidence as it is to underlying economic issues,” he said.
The consumer goods group has, however, grown market share in all key general merchandise categories – such as major appliances, which was up 5% in a year. Similarly, its retail food sales growth was “very encouraging” and outperformed the reported sector’s market growth.
For the first 21 weeks of the 2017 financial year, Massmart’s total sales growth was 0.3% and comparable sales declined by 1.9%, with year-to-date sales inflation of 4.4%. These group figures mask divergent sales trends across geographies and categories.
Total and comparable sales from local stores was 1.8% and -0.4% respectively, while the same figures from stores outside South Africa were -13.3% and -15.7% respectively in rands.
Massdiscounters’ total sales declined by 1.3% and comparable sales declined by 3.3%, with inflation of 1.6%. Game South Africa’s total sales growth was 2.1% and food and liquor sales in this business unit continued to perform strongly.
Meanwhile, Game Africa’s total rand sales declined by 11.4% but were up 8.6% in local currencies.
Masswarehouse’s total and comparable sales growths were 3.9% and 0.7% respectively, with inflation of 4.9%. In Masscash, total sales declined by 1.3% and comparable sales declined by 3.7%, with inflation of 5.5%.
“The current levels of political, business and consumer uncertainty make it difficult to provide any useful trading expectations for the remainder of the financial year, but we do not expect the local consumer economy to show any noticeable improvement during this time,” said Hayward.