Johannesburg - Massmart reported a 38 percent increase in its headline earnings - or profit - for its financial year ending June 24, 2012, it said on Wednesday.

“Massmart's first year as a Walmart subsidiary has delivered strong sales growth,” the company said in a statement.

Sales grew by 15.6 percent.

Massmart invested R1.7 billion in stores and infrastructure for long-term growth.

“Trading space increased by 7.3 percent to a total of 1,350,300

square metres and the group now has 348 stores (with 25 stores opened, 15 acquired and five closed).”

Massmart's operating profit increased by 21 percent while product price inflation was low at 1.8 percent.

A total cash dividend of 146 cents per share was declared.

Massmart CEO Grant Pattison said: “The results reflect the group's continued investment for growth across all divisions, but specifically for food retail.

“This has driven sales and market share growth, while suppressing margin growth in the short term.”

US retail giant Walmart acquired a controlling share in Massmart on June 20, last year, after it was approved by the Competition Tribunal with conditions.

The transaction was completed, except for the final ruling from the Competition Appeal Court on its supplier development fund.

Pattison said he was pleased with the continued improvement in government relations and particularly the support for the Massmart-Walmart direct-to-farm programme.

He said Massmart's high comparative sales growth suggested consumers were in pretty good shape.

The retailer had seen an increase in competition for market share in most product categories.

“Most major retailers are being highly innovative in their search for growth, whilst independent retailers remain nimble, exploiting gaps in the market,” he said.

Pattison expected future growth in sales and trading margins.

“The capital investments, our broad and growing relationship with Walmart, and our renewed focus on operating the business and delivering the strategy, positions us well for both growth in sales and trading margin in the medium to long term.” - Sapa