Massmart was off to a better start to this year after a difficult 2013, as it recorded improved sales growth in the first quarter, the food and general retailer said on Friday.
It said 2014 started better than last year, with comparable sales in the first 14 weeks rising 7.1 percent and total sales up 11.4 percent, compared with comparable sales growth of 3.8 percent for the entire 2013.
In his statement after the company’s annual general meeting, Massmart’s new chief executive, Guy Hayward said: “For the remainder of the year, we are hopeful that the current sales performance continues, although economic data seems not to support this.
“We are looking to a gradual recovery in the financial performance at Massdiscounters as the new strategy and operational focus takes effect.”
For the first 21 weeks of the 2014 financial year, Massmart’s total sales growth was 9.8 percent and comparable sales growth was 7 percent, with year-to-date inflation running at 4.5 percent. In the same period last year, it recorded a 9.8 percent increase in total sales and 5.6 percent rise in comparable sales, with year-to-date sales inflation of 3.1 percent. Massdiscounters increased sales by 6.9 percent, with Masswarehouse sales up 12.2 percent.
Hayward said all categories performed well except general merchandise, which grew sales by 3.6 percent on a comparative basis “signalling things are still tough for the South African middle-income consumer”.
Food and liquor sales were the strongest, increasing 8.5 percent as the segment grew market share.
He added that all divisions were performing satisfactorily, other than Game stores where comparable sales grew by only 0.5 percent and margin pressure remained.
“We are feeling more confident that the strategy being implemented is starting to show in operating performance, albeit not yet in financial performances.”
Massmart had previously said the popularity of all-in-one devices meant consumers were now shying away from gadgets such as cameras, laptops and MP3 players. “People now have access to video, camera, MP3s on their phones and smartphones. We are not going to do away with these devices but rather reduce stock,” former chief executive Grant Pattison said previously.
Absa Investments retail analyst Chris Gilmour concurred, saying Game and DionWired stores were facing similar challenges. He said companies selling electronic appliances had been taking a lot of strain.
Consumers faced a reduction in the availability of unsecured credit, so people would now have to rely on more cash and therefore could not afford big-ticket items, he said.
“The other problem is that people own phones which have navigators, cameras, videos and MP3s. Everything is converging and what was previously bought individually is now combined into a single gadget,” Gilmour said.
The retailer added that with the supply chain investment completed, it did not open any new distribution centres, but focused on opening high-return stores. “During 2014 we opened 14 new stores and closed six stores,” it said.
The shares fell 1.48 percent to close at R136.45 on Friday.