A shopper looks for items at Makro Store Riversands of South African retailer Massmart in Midrand

JOHANNESBURG - Retail giant Massmart said on Thursday sales were up 5.5 percent to R43.8 billion during the 26 weeks to June 30, against a backdrop of little external support both in South Africa and the 12 other African countries in which it operates.

Massmart, the second-largest distributor of consumer goods in Africa which owns brands such as Game, Makro, Builder’s Warehouse and CBW, said the South African consumer environment, which accounts for 91.1 percent of group sales, remained challenging with no significant improvement during the past six months.

Factors that impacted trading performance included low consumer confidence, gross domestic product contraction of 3.2 percent in the first quarter of 2019 and an increase to 29 percent in the unemployment rate.

"The prevailing low growth economy, coupled with various internal missteps, have contributed to an unsatisfactory set of results," Massmart CEO Guy Hayward said.

"Going forward we see useful opportunity to improve our operating model to position the business to better adjust to the changed economic reality.”

Gross margins decreased by 36 basis points while expenses were up 11.8 percent, resulting in considerably lower trading profit and a trading loss of R1.4 million.

"These results are, however, also reflective of internal missteps which have led to a number of fixable lapses within the business," Massmart said, citing insufficiently robust trading disciplines, negative inventory adjustments and delayed implementation of an IT solution at Game, as well as inventory management and ad hoc collections lapses at Masscash.

Actions were underway to fix these issues under the guidance of new leadership in these business units, it said.

Massmart said while it was hopeful for a slightly improved second half of the year, local and international uncertainty made near-term financial guidance difficult.

- African News Agency (ANA)