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Instability doesn't bode well for trading, says Massmart

Companies
Durban - Retail giant Massmart on Wednesday warned that increasing policy uncertainty in South Africa would have negative consequences for the economy.

Massmart said in its trading statement for the 13-week period to end March that retailers would struggle to provide any useful short- to medium-term performance outlook because of the uncertainties.

The group said it expected the year ahead to be constrained by weak spending as the effects of the recent political crisis and downgrades begin to hit consumers. The group said it achieved a moderate 0.5 percent total sales growth during the period, adding that the Easter holidays also hampered its performance, falling in comparison to the corresponding period last year.

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Customers browse the food aisles inside a Game supermarket. File Photo: Bloomberg

“For the 13 weeks to end March 26, Massmart’s total sales growth was 0.5 percent over the previous year’s period and comparable store sales decreased by 1.7 percent,” it said in its annual report.

Massmart said it expected the year ahead in South Africa to be characterised by subdued consumer spending. The group added that the sales performance outside South Africa remained weak with its rand total growth of -17.4 percent and comparable sales growth of negative 19.4 percent, while in constant currency these figures are negative 1.9 percent and  negative 2.1 percent, respectively.

“South African total and comparable sales growths were 2.5 percent and 0.2 percent, respectively. Given our large wholesale businesses, the group’s sales performance for the 13 weeks has been adversely impacted by Easter, falling in April 2017 compared to March in 2016,” the group said.

It had presented better results for the year to end December though. Total group sales for the year were 7.7 percent higher over the previous year, with a comparable sales growth of 5.4 percent.

“Product inflation was estimated at 6.7 percent, suggesting a real comparable volume decline of 1.3 percent. Inflation in general merchandise was up by 5.9 percent with food and liquor achieving growth of 7.7 percent and home improvements increasing by 4.7 percent,” the group said.

Damon Buss, equity analyst at Electus Fund Managers, said it was unlikely that the Easter sales would have had a material effect on the sales numbers.

“Boxing Day was also included in this 13-week sales number, where it was not in the prior year’s numbers ([which] would slightly offset the “lost” sales from Easter not being included),” said Buss.

He added that at their full year results’ presentation Massmart noted that sales in the first eight weeks of 2017 were only up 0.6 percent and on a like-for-like basis were down by 1.5 percent, which indicates that the weak sales performance was not due to the non-inclusion of Easter.

Buss said he was also expecting the retail sector to remain under pressure in the year ahead as consumer spending remains subdued.

Massmart shares dropped 0.74 percent to close at R137.38 on the JSE.

BUSINESS REPORT

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