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Massmart reports increased sales growth

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Builders Warehouse and Makro continue to perform well; Roll-out of food in Game has positive effect on general merchandise, Effective margin management and robust expense control keeps expense growth below sales growth

Key highlights

  • Sales up by 9.1% (R38.917.4m) (2014: R35.659.8m)
  • Operating profit before forex and interest up by 12.7% (R791.9m) (2014: R702.9m)
  • Operating profit before interest down 1.4% (R685.2m) (2014: R695.0m)
  • Dividend per share unchanged at 146.0c

Massmart today announced its interim results for the 26 weeks ended 28 June 2015, reporting a total sales increase of 9.1%, while comparable sales increased by 6.9% with product inflation at 3.7%, suggesting good volume growth. Group operating profit, excluding foreign exchange movements and interest, grew by a satisfactory 12.7% given the soft economic environment.

Commenting on the results Massmart CEO, Guy Hayward said: “Despite the constrained consumer environment, Massmart sales remained resilient during the period. We are pleased with the effective margin management and robust expense control which allowed us to keep expense growth below our sales growth, particularly in an environment where all participants are competing keenly for profitability and market share. The intense retail competition, however, is good news for consumers.”


Divisional performance

Massdiscounters total sales increased by 9.1% and comparable sales grew by 4.1%. Trading profit before interest and tax also increased by 8.0%. Game South Africa’s steady turnaround continues, with sales growth of 9.3% and a trading profit increase of 12.1%. The roll-out of Fresh in Game continues with 74 stores now offering this category, while Food sales comprise 19.8% of Game’s total sales.

Food comparable sales’ growth remains strong at 14.1% and our customer research has shown that 20% of Game customers regard Game as a food destination and the majority of these food customers cross-shop the Group’s general merchandise categories,” Hayward said.

DionWired continues to perform well, reporting total sales growth at 7.9%.

Makro performed superbly in a challenging economic environment, demonstrating that customers are responding strongly to the Group’s value proposition. Makro online had 8.4million unique visitors since launching in April 2014. The field test phase of Makro’s Pick-Up lockers at Sasol forecourts and McDonald’s restaurants in Gauteng has provided an additional delivery option for online shoppers.

The Group reported another strong performance at Massbuild with robust sales growth in Builders Warehouse and Builders Express suggesting continued market share gains.

Masscash total sales increased by 4.8% in a competitive environment. Masscash Wholesale market share has increased since 2014 despite the commodities deflation effect. Masscash Retail which includes Cambridge Food and Rhino Cash & Carry, traded well reporting comparable sales growth of 6.3%.


Africa growth

The new Game stores in Zambia and Kenya are performing well, Hayward said. Builders Warehouse sales outside of South Africa grew by 68%, bolstered by the strong performance of the Matola, Mozambique, store opened in 2014.

Hayward added: “We remain excited about the long-term growth opportunity across several African countries and will continue with a patient and measured approach.”

 

Strategic priorities

Massmart remains focused on the key strategic priorities: to drive the growth and profitability of the core South African business over the medium-term; to grow our Food Retail and Fresh proposition in existing formats; to grow our Sub-Saharan African business with eight new stores anticipated for the next two years; and to grow the Group’s ecommerce capability, which has seen Makro emerge as a retail leader in the area.

Hayward concluded: “We remain confident and resolute about delivering our strategic priorities, but the economic environment may be a constraining factor.”

The Group declared a gross interim cash dividend of 146.0 cents per share for the period ended 28 June 2015.

-Ends-

For Media Enquiries

Annaleigh Vallie, Group Communication Manager

avallie@massmart.co.za

Media Release Issued by Brunswick South Africa

Gordon Kgaugelo Letsoalo

Georgie Armstrong

011 502 7300

 

About Massmart

Massmart is a managed portfolio of four divisions, each focused on high-volume, low-margin, low-cost distribution of mainly branded consumer goods for cash, in 13 countries in sub-Saharan Africa comprising 398 stores.

The Group is the second largest distributor of consumer goods in Africa, the leading retailer of general merchandise, liquor and home improvement equipment and supplies, and the leading wholesaler of basic foods.

 

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