Game Africa affects Massmart results
Massdiscounters (Game and Dion Wired) showed a 44,7% drop in trading profit for the 6 months ended December 2014, which negatively affected the Massmart overall figures (overall group profit up by 3,4%).
However, other divisions fared much better, namely Masswarehouse (Makro and Fruit Spot) grew trading profits by 11,2% and sales by 10,2%; Massbuild (Builders Warehouse and brand extensions) grew profits by 15% and sales by 14,6%; and Masscash (Jumbo, Shield, CBW and Cambridge) sales grew by 8,0% while trading profit was 14,9% higher.
The food component of Massmart is increasing apace and now accounts for R14,7 billion for the 6 months, which reflects a participation of 18,7% of total sales. Game stores that also carry food under the Foodco brand have accumulated R3 billion in sales and stores with food have now a higher trading density than those without grocery and perishable sales.
Game continues to combat the monopoly policies of some chains as major anchors in shopping centres, but will not pursue the food offering in stores that are smaller than 4 000m2. Future plans in the food area include the enhanced development of private labels, developing dedicated supply chains for fresh, meat and bakery (by utilising 3rd party operators) and the roll out of all fresh departments such as dry groceries, produce, bakery, butchery and prepared meals.
Group net profit before tax for the 6-months to December 2014 was R1,621 billion (2,07% of sales) which was lower than the same period last year (2,6% of sales).
Like other retailers in South Africa, the development plans for the next two years are very bullish and here are some of the proposed store openings per division:
Division Stores to be opened Total No. by Dec 16
Massdiscounters 19 172
Masswarehouse 1 20
Massbuild 20 120
Masscash 23 143
TOTAL 63 455
This store opening programme will increase the Massmart floor space by 12,5% and 13 of these stores will be opened outside of South Africa. Like other retailers trading North of the border, the group is wary of the trends in the oil price, the depreciation of the Rand as well as the depreciation of currencies such as the Nigerian Naira and the Ghanaian Cedi.