Skip to main content

Stronger dollar mutes Massmarts hopes

| Retailer trading results

Massmart said there was heightened margin pressure across the retail value chain as all participants — suppliers, service providers and wholesalers — were competing keenly for profitability and market share.

The owner of brands such as Game and Makro reported operating profit growth, excluding foreign exchange movements and interest, of 12.7% to R791.9m, which was lower than it had hoped.

Sales in the 26 weeks to June 28 rose 9.1% to R39bn.

"We are incurring higher interest costs because of capital expenditure — buying all those stores in the last two years, that’s kicking in hard now. Because of our African businesses and the weaker African currencies, we took some foreign exchange currency hits," CEO Guy Hayward said.

Headline earnings fell by 26% including foreign exchange movements. Apart from the rand, which has depreciated from R7/$ to more than R13/$ since 2012, many countries in sub-Saharan Africa are facing double-dip economic challenges from the stronger dollar and weaker commodity prices.

The group operates in 12 countries outside its home market where it has pencilled in another eight new stores in the next two years.

According to Wayne McCurrie, portfolio manager at Momentum, there was no underlying problem, but Massmart was feeling the pinch of the consumer coming under strain.

"They have a couple of challenges at Game, but Builders Warehouse is doing extremely well. They are virtually in all their divisions growing sales but not massively above their internal inflation though," he said.

At Massdiscounters, which includes Game and DionWired, total sales rose by 9.1%. Comparable sales grew by 4.1%.

"It’s going to be more difficult going forward because fuel prices are going up more strongly over the next six months. They are maybe going to have to cap their margins a bit to maintain sales volumes.

"In comparison to other retailers their share hasn’t done well. It’s got a very high rating and is very expensive for a company (whose) earnings are going down," Mr McCurrie said.

Sales at Massbuild, which includes Builders Warehouse, grew by 16.3%. Comparable sales increased by 10.6%.

The renovation market has proved more defensive than broader retail segments and buildingware stores in SA are underpenetrated, unlike the grocery segment that is cannibalising existing stores due to the maturity of the space.

Masswarehouse, comprising the 19-store Makro warehouse-club and The Fruitspot, saw sales rise 11.4%.

Sales at Masscash, which predominantly targets the lower-end market, inched up 3.9% on a comparable basis.

Pin It

Related Articles

By: Edward West - IOL Woolworths Holdings (WHL) lowered its interim dividend by 28% and has warned that recent US-related global trade relations positions have elevated the macro-economic risk outlook for South Africa, even though consumer con…
By: Tawanda Karombo – IOL Shoprite has reported an impressive growth in sales volumes across its operations for January, continuing the momentum from its robust performance in the half year ending December 2024.
By: Ashley Lechman- IOL In its trading update for the half-year ended 29 December 2024, the Woolworths group reported a solid increase in turnover and concession sales, rising by 5.7% compared to the preceding period.
In the six-month period ending 31 August 2024, Dis-Chem reported Group revenue growth of 9.6% to R19.6 billion over the corresponding half year period to 31 August 2023.
The Pick n Pay Group’s turnaround strategy is gaining traction with encouraging progress made across a number of key strategic and operational initiatives, including another formidable performance from its Boxer business and an underlying improvemen…