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Financial results for the 26 weeks ended 29 June 2014

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Key highlights
– Total sales up 10.2%
– Comparable sales up 7.1%
– Operating profit down 3.8%
– 146 cents dividend per share

Massmart announced its results for the 26 weeks ended 29 June 2014, reporting a total increase in sales of 10.2%, with comparable sales increasing 7.1% against a backdrop of difficult trading conditions, particularly among lower and middle-income consumers. This was reflected in divisional results with those divisions (Builders and Makro) with a higher-income focus performing better when compared to those (Game) with exposure to lower and middle-income consumers.

Commenting about the consumer environment CEO Guy Hayward said the five-month long strike in the mining sector, which had resulted in a significant sales decline in stores close to the affected regions, may have had a greater knock-on impact on the economy than was generally understood. “The gradually tightening interest rate cycle will make things more difficult for middle-income customers and possibly those in the upper-income brackets. However, for the meantime, upper-income customers appear resilient.”

Performance in Massmart’s non-South African businesses, comprising 31 stores in 11 countries, representing 7.8% of overall sales was particularly strong. “The reaction of consumers to Builders Warehouse in Botswana and Mozambique has been very positive. Plans are on track to open 13 new Game, Builders Warehouse and wholesale stores over the next two years which will double our trading space outside of South Africa,” Hayward said.

An adverse movement in foreign exchange translation coupled with the higher interest paid due to increased borrowing levels resulted in headline earnings decreasing by 25.5%.

Commenting on the group’s food retail ambitions Hayward said that consumers were responding well to the retail food, dry groceries and fresh offering in Makro, Game and Cambridge. He added that the retail food offering had, with Walmart’s guidance, grown to R11 billion in the past three years.

Divisional performance

At Massdiscounters, which includes Game and DionWired, total sales for the 26-week period increased by 8.0%, and comparable sales increased by 4.0%. Given the difficult consumer environment, Game South Africa’s comparable sales only grew by 0.4%.

The roll-out of dry groceries and Fresh continues with 55 Game stores now offering both these categories. Comparable food sales growth in these stores was strong at 20.1%. Game Africa’s total Rand sales and sales in local currencies increased by 20.2% and 13.2% respectively. DionWired total sales growth was 12.6% and has become a destination store within its category.

Makro traded exceptionally well in a difficult environment – total sales for the 26-week period increased by 12.3% and comparable sales increased by 9.4%. The stores opened in 2011 and 2012 are showing accelerating sales growth and contributing strongly to profits.

Massbuild, which includes Builders Warehouse, Builders Express, Builders Trade Depot and Builders Superstore, confirmed its market-leader position by growing total sales for the 26-week period by 14.5% and comparable sales by 8.8%. Builders Warehouse and Builders Express performed exceptionally. “We are particularly pleased with the performance of the four Builders Warehouse stores in Botswana and Mozambique. Builders Superstore is trading well,” Hayward said.

In an extremely competitive South African wholesale and retail environment, Masscash increased total sales by 8.6% with comparable sales increasing by 6.8%. Total sales growth in the non-South African wholesale businesses was pleasing at 12.0%.

The Group reported sales growth of 10% for the 34 weeks to 24 August 2014, while comparable sales were up 7.1%. We expect this trend to continue.

“We remain focused on cost management, offering our customers exceptional value and innovation,” Hayward concluded.

A dividend of 146 cents per share for the period ending 29 June 2014 has been declared.

Issued by
Brunswick Group LLP
011 502 7300

For Media Enquiries:
Annaleigh Vallie
Massmart Group Communications Manager
011 797 0293

Brunswick
Cecilia de Almeida – 083 325 9169

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