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Massmart shares surge on surprise results

Retailer Massmart’s share price jumped almost 9%, after the group reported a better than expected performance for the half-year to end-June.

Despite this, analysts maintain that although Massmart is benefiting from improving consumer confidence, retail spending continues to be constrained by rising fuel costs and tax increases. The company reported total sales for the 26-week period of R41.6bn, or an increase of 1.9%, with comparable store sales rising 0.2%.

Including the results of business unit Shield — which Massmart no longer includes in group sales figures — overall sales declined 2.2% and comparable stores 3.9%.

Although subdued, the results were still better than expected due to the difficult operating environment, said 36One Asset Management analyst Daniel Isaacs.

"There is little to no inflation to help the revenue line and volumes are still muted. This presents challenges when facing a cost growth well above this," said Isaacs.

Massmart’s share price rose 7.98% to close at R115 with JSE-listed retailers having benefited this week from a falling oil price and positive economic data.

Retail sales data for May, released on Wednesday, were upbeat, showing growth of 1.9% year on year, compared with the consensus forecast of 0.8%.

While most analysts said this was positive, FNB senior economist Jason Muscat said the data suggested consumers were reining in spending, probably to divert cash to rising fuel costs.

While a rebound was anticipated after the VAT increase, "the data is still extremely weak against the backdrop of high wage settlements and well-contained inflation, and it seems hopes of a consumption-led economic recovery are fading".

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