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Weak SA spend sees Massmart profit plunge

Johannesburg - Massmart, the South African food and goods wholesaler owned by Wal-Mart Stores, said first-half profit fell by 26 percent after the rand weakened and retail sales deteriorated.

Earnings declined to 364 million rand in the 26 weeks through June 29, the Johannesburg-based company said in a statement today.

A Makro wholesale outlet in Johannesburg. Credit: AP

Sales gained 10 percent to 35.8 billion rand and continued the same growth increase in the weeks until August 24.

The dividend for the period was unchanged at 1.46 rand.

“South African retailers are facing a weaker consumer environment, accompanied by some inflation volatility, higher interest rates and negligible economic growth,” said the owner the cash and carry chain Makro and do-it-yourself specialist Builders Warehouse.

These factors “seem likely to persist for 2014 and possibly 2015.”

South African retailers are struggling as high unemployment and inflation force shoppers to cut down on major purchases.

Retail sales were unchanged in June, the worst performance since December 2009, while the rand is on track to decline against the dollar for a fourth consecutive year.

The South African Reserve Bank raised its benchmark interest rate for the second time this year on July 17, cutting disposable income for borrowers.

Massmart shares fell the most in more than eight years on August 20 after the company said first half earnings decreased by as much as 29 percent.

The stock rose 1.3 percent to 134.39 rand by the close in Johannesburg yesterday, increasing this year’s gain to 3.4 percent. - Bloomberg News

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