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S.Africa's Massmart HY profit muted by weak consumer spending
* HEPS down 20 pct excluding restructuring costs
* Sales hampered by muted consumer spending
(Adds CEO quote and detail)
By Patricia Aruo
JOHANNESBURG, Aug 23 (Reuters) - South African retailer
Massmart Holdings reported a drop in half-year profits
on Thursday as cash-strapped consumers prioritised food over
higher-margin discretionary goods such as electronics.
South African retailers have struggled to lift earnings as
elevated household debts, higher fuel prices and an increase in
value-added tax squeezed consumer income at home.
In the rest of Africa, retailers are battling with currency
weakness against the dollar and lower commodity prices.
Massmart, part of Walmart Inc, said it took its
biggest hit at its electronics businesses as consumers opted to
spend on food over durables.
"One of the economic realities of this consumer pressure is
that people only have money for about three to five days of the
month when they get paid," said Massmart chief executive Guy
"Something most retailers are doing is looking at private
label, where you can offer a lower price product at a quality
similar to international brands."
Retailers including Woolworths and Shoprite
reported declines in their full-year earnings this
week, similarly impacted by constraints on consumer spending.
Massmart's total like-for-like sales for the six months
ended July grew 1.9 percent to 41.6 billion rand, while online
sales increased 69 percent. Trading profit before interest and
tax fell 19.5 percent.
The company's sales on the rest of the continent, where it
operates in twelve African countries, were hampered by currency
weakness against the dollar and lower commodity prices, it said.
Headline earnings per share before restructuring costs were
133 cents per share, a 20 percent fall from 169 cents per share
in the same period of the previous year.
Hayward said the company is "cautiously optimistic" about
domestic growth for the second half of the year due to the
current volatility of the economy.
At 1406 GMT, shares in Massmart weakened 2.83 percent to
($1 = 14.6363 rand)
(Reporting by Patricia Aruo
Editing by Tiisetso Motsoeneng, Jane Merriman and Jan Harvey)
First Published: 2018-08-23 08:22:43
Updated 2018-08-23 16:48:56
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