Economy / 7 August 2013, 08:01am / Zandi Shabalala
Johannesburg - Despite the competitive environment and constrained consumer spending, building material retailer Cashbuild plans to add more than 10 stores in the next financial year.
Chief executive Werner de Jager said yesterday that although the market was tough, Cashbuild would focus on improving its own efficiencies to make the expansion a success.
The retailer, which operates 201 stores in South Africa and its closest neighbours, opened four new stores between April and June.
The company reported an 8 percent annual increase in revenue for the quarter to June.
Cashbuild has three outlets in Namibia, five stores in Lesotho, 10 in Botswana and six in Swaziland. Namibia made the biggest contribution to the overall revenue rise, growing 18 percent in the reporting period.
Although sales increased faster between April and June than in the previous three months, overall growth for both of the periods came in at a pedestrian 2 percent.
“We are in a more competitive environment so you have to be sharper on pricing,” said De Jager. He said this, combined with the fact that the market was depressed, accounted for the slow growth.
De Jager said in light of the “tough trading environment” he was pleased with the 8 percent growth in the quarter.
“We tackled the fact that we have not been doing well, we have introduced a number of internal mechanisms to review our past performances and make things better, and also in terms of pricing,” De Jager said.
In March last year, Cashbuild attributed higher sales in the six months ending in December 2011 to a boom in its rural stores. De Jager said he could not make the same deductions for this period and that growth was spread evenly throughout the country.
De Jager said he was realistic in terms of his expectations and the company expected store activity to remain at low levels similar to the past two quarters. “We know the market is tough and that the consumer is under pressure,” he added.
Imara SP Reid analyst Sibonginkosi Nyanga noted: “The trading update will certainly [have] disappointed the market as the retailer has been priced for strong growth.
“But I don’t think it is a surprise because everyone knows that there is a slowdown in unsecured lending.”
Nyanga said constrained consumer spending had affected both the broader construction segment and retailers in the building material and renovations market.
Cashbuild’s larger rival, Massmart, recently opened its second Builders Warehouse store in Botswana.
De Jager said he did not think Cashbuild had lost market share to its competitors as its offering was different.
Cashbuild shares fell 0.77 percent to close at R128.14 on the JSE yesterday. - Business Report