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CEO’s AGM Statement
Massmart Holdings Limited
(Incorporated in the Republic of South Africa)
Company registration No. 1940/014066/06
JSE Code: MSM
ISIN: ZAE 000152617
("Massmart", “Company” or the “Group”)
CEO’s AGM Statement
Here is a brief sales and performance update for the Group.
As noted in last week’s SARB MPC meeting, the short- and medium-term outlook
for the South African economy remains muted, uncertain and likely volatile too.
Reported CPI for April 2016 included a Food inflation component of 11.3% which
is a five-year high. This corroborates with our expectations of drought-induced
Food inflation accelerating, likely only abating in Q4 of this year or Q1 of 2017.
Price inflation for imported durable product is now expected to rise, as retailers
and suppliers have sold out of product originally purchased or hedged prior to the
December 2015 currency weakness.
The South African consumer economy is in a classic defensive cycle with rising
inflation, including Food, leading to higher interest rates which, in turn, both
constrain consumers’ discretionary spending. As we report below, these trends
are evident in each of our food and non-food businesses.
For the first 21 weeks of the 2016 financial year, Massmart’s total sales growth is
9.0% and comparable sales growth 6.7%, with year-to-date sales inflation of 5.4%.
Comparable sales growth in Food and Liquor is 11.5% while General Merchandise
and Home Improvement comparable sales growth is 0.5%. In addition, total and
comparable sales growths in ex-SA African countries are almost double those
seen in South Africa.
Massdiscounters’ total sales growth is 7.9% and comparable sales growth 2.8%,
with inflation of 4.4%. Game’s sales growth in South Africa is adversely affected
by strong sales of load-shedding and associated products in the prior year, as well
as pressure on General Merchandise sales. Although trading conditions across
most African countries remain difficult, Game Africa’s total Rand sales growth is
29.4% and comparable sales growth 9.5%. Severe currency weakness and
associated illiquidity in certain countries is causing short-term unrealised foreign
exchange translation losses and lower reported Rand profits. DionWired’s total
sales growth is 10.4% as it benefits from good strategic focus and execution.
Masswarehouse is performing well, with total and comparable sales growths of
9.4% and 7.4% respectively, with inflation of 4.9%. Food and Liquor sales growths
are stronger than General Merchandise, which is also being impacted by high
load-shedding product sales in the prior year. Online sales are double those of
the same period in the prior year. Last month we opened a new Makro store at
Carnival, east of Johannesburg, our 20th store and opening sales were spectacular.
Massbuild’s total sales growth is 6.0% and comparable sales growth 0.9%, with
inflation of 3.6%. As noted in the sales performance to December 2015, the
decline in Massbuild’s sales growth is predominantly caused by negligible sales of
load-shedding products, continued slowing-down of sales to contractors, and
lower sales to certain provincial and local government projects. Growth in total
sales to retail customers however, remains steady at 7.3%. Sales growth in
Botswana, Zambia and Mocambique remains exceptionally strong.
In Masscash, Wholesale’s total sales growth is 5.7% and comparable sales growth
10.0%. The large difference between the two sales figures is due to the loss of
the Jumbo Crown Mines store which was destroyed by fire in February 2016 and
three store closures in 2015. The comparable sales figure better represents
underlying trading. In Masscash Retail, total sales growth is 21.4% and
comparable sales growth 13.3%. Retail’s total sales are boosted by the great
performances from five new stores opened since May last year. Sales inflation
was 7.2% in Masscash.
Despite the challenging trading conditions in our non-food areas, our strong food
sales, good margin management and effective expense control should assist in
delivering a satisfactory performance for the six months to June 2016.
The Group remains focused on our strategic objectives of: improving profitability,
growing food and DIY in South Africa, growing into Africa, and developing our
online / digital capabilities. During 2016 we plan to open a net total of thirteen
new stores representing net space growth of 3.1%, and have already opened
seven stores, most reporting very strong sales. We estimate that our stores
opened in South Africa since January 2015 have contributed 1 300 permanent and
5 000 temporary or indirect jobs.
Our next sales update is for the 26-week period ending 26 June 2016, to be
released in mid-July.
The above information has not been reviewed and reported on by the Company’s
external auditors.
Johannesburg
26 May 2016
Sponsor
Deutsche Securities (SA) Proprietary Limited
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