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Massmart CEO loses hope of trading environment improving in 2017

| Economic factors

Massmart’s share price fell 3.6% to R114.73 on Thursday morning after CEO Guy Hayward said his hopes of a better trading environment in 2017, which he forecast in February, had been dashed.

"The current levels of political, business and consumer uncertainty make it difficult to provide any useful trading expectations for the remainder of the 2017 financial year, but we do not expect the South African consumer economy to show any noticeable improvement during this time," Hayward said at the Walmart subsidiary’s annual general meeting on Thursday.

"As regards our stores in countries outside of SA, this second quarter marks the annualisation of the severe currency weakness in many of those countries and so it is possible that our reported rand sales will soon show a relative improvement in growth."

In the 21 weeks since Massmart’s 2016 financial year ended on December 25, total sales growth was 0.3%. But excluding new stores, sales declined 1.9% while its inflation averaged at 4.4%.

easured in rand, total sales for stores outside of SA declined 13.3%. Excluding new stores, the decline was 15.7%.

In SA, total sales grew 1.8%, but declined 0.4% excluding new stores.

"In late February this year, in the Massmart’s December 2016 annual results release, we expressed cautious optimism about the 2017 financial year. This was predicated on signs of green shoots in the economy, including the drought ending resulting in declining food inflation, a stronger rand, potentially lower interest rates, and the recent improvement in the [South African Reserve Bank’s] leading indicator," Hayward said.

"The nascent signs that some or all of these positive influences were coming to bear were unfortunately washed away by the negative economic impact of political events in late March and April that culminated in two credit-rating downgrades."

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