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CEO AGM Statement May 2013
Massmart Holdings Limited:
(Incorporated in the Republic of South Africa)
Company registration No. 1940/014066/06
JSE Code: MSM
ISIN: ZAE000152617
(“Massmart”)
CEO AGM Statement May 2013
The recent change of Massmart’s financial year-end to
December marked a transition in management focus. With the
Walmart transaction now behind us – which included the
Competition authority’s approval, integration, and changing
external auditors – we have begun a period where our focus
is concentrated on strategic implementation and operational
execution.
We have conducted a thorough review of the business. This
has resulted in management changes and redoubled focus on
underperforming parts of the business on strategic and
operating disciplines, including considering closing or
selling underperforming stores.
This period also marks the completion of our Supply Chain
investment and the first-phase of our entry into Food
Retail, ending a five-year period of very significant
capital investment, start-up costs and initial operating
inefficiencies.
The focus on operational execution has been timeous as
recent events – global, regional and local – have resulted
in a general decline in the health of the South African
consumer.
For the first 21 weeks of the 2013 financial year,
Massmart’s total sales growth was 9.8% and comparable sales
growth was 5.6%, with financial year-to-date sales
inflation of 3.1%.
Total and comparable sales growths in each Division are:
17.0%, 7.4% (2.8% inflation) in Masswarehouse;
5.6%, 4.5% (5.0% inflation) in Masscash;
10.0%, 4.5% (0.7% inflation) in Massdiscounters; and
7.6%, 7.5% (2.9% inflation) in Massbuild.
The decline in comparable sales growth has been evident in
all product categories and across all South African
geographies. With the exception of one country, stores in
Africa are trading well.
A close examination of our market shares, where they are
reliably measurable, shows that we are holding or gaining
market share in most categories at a Group level, although
in some instances may be swapping market share between
Massmart brands.
We remain focused on store growth in South Africa and sub-
Saharan Africa. New store openings have included opening a
Makro in Alberton, Builders Warehouse in George, Saverite
in Xai Xai, Mozambique, one Cambridge and two Game stores,
and the commissioning our Massbuild national DC in Midrand,
Johannesburg. Over the remainder of the financial year to
December, we will open 27 stores, including a Makro in
Amanzimtoti, Durban, and a Builders Warehouse store in each
of Botswana and Mocambique.
The increase in trading space compared to a year ago is 9%.
We have completed the acquisition of seven Makro properties
that were previously lease-held and secured a loan from
Walmart to fund this purchase.
We were proud to repeat our annual Festive Season giving
projects with a donation of three tons of Nutri-meal to
Food Bank South Africa. Additional major projects during
this period include, in partnership with our suppliers,
donating food hampers to families of SANDF members serving
on external deployment and the provision of back-to-school
stationery hampers to children of police officers who have
died in the line of duty.
We anticipate that comparable sales growth will remain soft
for the remainder of the financial year. In response, we
have plans to drive sales, maintain gross margins and focus
aggressively on costs. Given these sales levels and the
initial impact of the new Massbuild national DC and the new
Makro store, both opened in April 2013, it is unlikely that
we will maintain operating margins for the half-year to
June 2013. Operating margins for the full-year should
recover but probably not to 2012 levels. This situation is
exacerbated by the Group’s significant capital expenditure
over the past 18 months, including the third and final
Massdiscounters RDC opened in July 2012.
The Group’s 21-week sales performance formed the basis for
the above statements.
Our next sales update will be in early July 2013.
The above information has not been reviewed or reported on
by the Company’s auditors.
Johannesburg
22 May 2013
Sponsor: Deutsche Securities (SA) Proprietary Limited
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