During a year where the sub-Saharan consumer environment became increasingly challenging, Massmart’s total sales were R91.3 billion, an increase of 7.7% over the prior year. Comparable stores’ sales growth was 5.4%, with product inflation of 6.7%. Currency weakness and challenging operating environments saw total sales growth from our non-South African stores slow to 11.2% (13.4% in constant currencies) from 23.2% for the six months to June 2016.
Good margin management and excellent expense control resulted in Group trading profit, excluding foreign exchange movements and interest, growing by 11.9% to R2.6 billion, while headline earnings increased by 15.6% to R1.3 billion.
19 stores were opened, including two outside South Africa, representing new space growth of 3.7%. Our focus on optimising the Group’s store footprint continued, with ten stores being closed, resulting in a net space increase of 1.2%. Our portfolio of 412 stores includes 39 outside South Africa producing 8.7% of the Group’s sales.
South African environment
The difficulties facing the South African consumer deteriorated in the latter half of 2016. The main impact coming from weak underlying economic growth, compounded by high Food inflation which averaged about 11.3% in the six months to December 2016 (per StatsSA). The Group’s sales trends in the final quarter to December 2016 were difficult to interpret usefully as November was distorted by our extremely successful Black Friday campaigns, which likely softened early December sales, and an additional trading day in the final Christmas week. South African comparable stores’ sales growth was 5.6% for the year.
The divergent sales performances across our major product categories reflect the economic pressures within the South African consumer environment, with total Food & Liquor sales growing at 11.7% for the year while General Merchandise grew by only 1.5% and DIY total sales grew by 5.6%. It is clear that General Merchandise continues to be negatively impacted by very low discretionary spending by consumers.
Drought conditions in southern Africa remain severe and sales growths in this region slowed noticeably in the latter part of 2016. Slightly more than 50% of the Group’s ex-SA sales are non-Food (General Merchandise and Home Improvement) and the difficult economic conditions exacerbated these categories’ performances. The Group’s total sales growth in Rands was 11.2%. Comparable stores’ Rand sales growth was 3.1%, which at a category level was 9.4% in Food and 0.6% in non-Food. Currency weakness in Nigeria and Mozambique significantly impacted our reported Rand sales growth.
The contribution of our 48,000 colleagues never goes unnoticed or unappreciated, especially in the current environment where likely many of them and their own families were feeling the adverse consequences of the weak economy. We would like to acknowledge and thank every colleague for their service and support, including those in our administrative offices and distribution centres, knowing that part of the Group’s improving performance comes from their efforts.
Directorate and Executive Committee
With effect from November 2016, Joe Ralebepa joined the Group as General Counsel and the Massmart Holdings Company Secretary. Richard Inskip joined in January 2017 as Group Supply Chain & Logistics Executive to focus on leveraging the Group’s transport, logistics and supply chain.
After 2.5 years on the Massmart Board, Walmart-appointee Andy Clarke has resigned with effect from 22 February 2017. Andy’s deep retail experience contributed significantly to the Group’s retail thinking and execution, especially on Fresh and online, and we thank him for his valuable service.
On behalf of the Board
Guy Hayward Johannes van Lierop
Chief Executive Officer Chief Financial Officer
22 February 2017