Massmart shows no signs of slowing down

Staff Reporter

Staff Reporter

Massmart, Africa's third-largest distributor of consumer goods and a leading retailerhas a R100million turnover a day, showed resilience in its interim results in an environment characterised by sagging consumer sentiment.

Guy Hayward, financial director of the group, said the National Credit Act is changing the retail landscape fundamentally.

Pressure of higher interest rates on middle income consumers as well as high inflation dulled the Massdiscounters division. This was countered by the Masswarehouse, Massbuild and Masscash divisions.

Total inflation in the group is running at 6.3percent, while food and liquor inflation is expected to remain at the high levels of 9.8percent at which it currently stands.

What the group has found is that consumers are returning to value.

The cash-based profile of the group is serving the company well.

But the group is struggling to find sites, made all the more challenging by the fact that power might not be able to be supplied to new growth areas.

Hayward says uncertainty in the country is high. But the group view takes an upbeat view on the basis that fundamentals are in place to support medium-to long-term growth regardless of the short-term cycle.

Driving this is infrastructure spend, the need for new houses, and increases in social spending.

GDP on the other hand is expected to decline, and clarity is awaited from Eskom on load-shedding and the long-term impact.

January power outages lost the group 0.2percent of trading hours while 3 percent of total group operating hours' were affected.

In the six months to December 2007 sales increased by 11 percent to R20 billion and gross profit of 18.4 percent was slightly higher than the previous period.

Headline earnings before the black economic empowerment transaction rose 16 percent to R802 million.

Chris Gilmour, an analyst at Absa Asset Management, said of all the fast-moving consumer goods stocks out there, Massmart offered the best value.