Nompumelelo Magwaza
MASSMART’S struggle with the Game Stores chain is starting to turn a corner, but it has still not reached the point where management wants it to be.
However, Massmart chief executive Guy Hayward said yesterday that he was comforted by Game Stores’ performance in the fourth quarter of 2014 and hoped the positive trading would spill over to this year.
Game Stores, which has 130 stores, forms part of the Massdiscounters division that includes DionWired stores.
The Massdiscounters division managed to increase sales by 10.2 percent and comparable sales were up 4.8 percent. Game South Africa’s comparable sales grew by 8.1 percent.
Consumer spending had lifted in the fourth quarter, Hayward said.
“What we have been doing in the last 18 months was to try and get better and better on our retail execution inside Game Stores… We also believe that the improved performance is due to us running better shops and hope that it will spill over to 2015.”
Besides the struggle to attract sales, Game Stores had also been battling to roll-out its Game FoodCo business as a result of some legal resistance from its competitors through exclusivity lease clauses.
Game FoodCo stores, which is now worth about R3.2 billion, has been rolled out in 66 Game Stores.
The group’s total sales growth was up 10.4 percent to R78.17bn with operating profit before foreign exchange rate and interest up 4.3 percent to R2.016bn.
Higher net interest paid from funding several significant property acquisitions in 2013 and 2014 and an adverse movement in foreign exchange translations resulted in headline earnings after foreign exchange movements decreasing by 10.2 percent. Excluding foreign exchange movements, headline earnings declined by 3.5 percent.
Hayward said: “I am happy with that, but also disappointed with Game’s performance. It is not to our high standards. Some of the problems came from us and some from the general trading environment.”
Daniel Isaacs, an equity analyst at 360NE Asset Management, said Massmart was working on their Game offering and had seen improvements.
However, he was not sure whether this would be enough to restore the chain to its historical levels of profitability.
“There are two questions. Whether they going to improve off the very low-base of last year, which I think they will. The other question is whether they will go back to historical profitability. This is not certain as the market landscape has changed.”
An interesting point from the results was a significant investment in space, especially in Africa.
Massmart shares closed 0.31 percent higher to R163 on the JSE yesterday.