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Massmart has stronger start than expected

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Though commentators forecast a difficult South African consumer economy this year, retailer Massmart said in its annual report on Tuesday that sales rose 11.4% for the 14 weeks to April 6.
This is a much stronger start to the financial year than the group expected, as retail sales growth in South Africa has slowed due to curbing of credit, moderation in income growth and rising living costs.
For the period, Massmart’s comparable sales rose 7.1%. In the same period last year total sales grew 10.3% and comparable sales gained 6%.
“While too early to be confident about this new trend, the strong start suggests a better overall performance this year than last year,” the group said.
The credit impetus to spending continued to fade in the first two months of the year, Reserve Bank data showed, while consumer confidence continued to hover near record lows, Barclays Africa economists Miyelani Maluleke and Peter Worthington said in a research note. “We expect household spending growth to remain on the soft side over coming months,” they said.
Massmart’s full-year results were muted — a 9.8% rise in sales for the 53-week period to December 29 to R72.3bn, boosted by an extra trading week and favourable currency swings. The Walmart-owned group said the recent interest-rate hike seemed certain to make things more difficult for middle-income customers in a weak financial position. By contrast, upper-income customers appeared in a better financial position but spending would depend on confidence levels.
“We are much more positive about the business as we reap the rewards from the operational focus of last year,” the group said. Along with opening distribution centres that leverage supply chain and improve in-stock levels, the company has installed common IT platforms and is working on improving in-store shopping.

By Zeenat Moorad
Business Day

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