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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: ZAE000152617
("Massmart", “Company” or the “Group”)
CEO’s AGM Statement
Here is a brief sales and performance update for the Group.
In late February this year, in the Massmart’s December 2016 annual results release, we expressed
cautious optimism about the 2017 financial year. This was predicated on signs of green shoots in the
economy including: the drought ending resulting in declining Food inflation, a stronger Rand, potentially
lower interest rates, and the recent improvement in the SARB Leading Indicator. Our perspective
contemplated a challenging first half to the 2017 financial year likely followed by a steadily improving
consumer economy which would be more supportive of a discretionary or non-food retail cycle. The
nascent signs that some or all of these positive influences were coming to bear were unfortunately
washed away by the negative economic impact of political events in late March and April that
culminated in two credit-rating downgrades. The unfavourable impact on sales in discretionary product
categories, such as general merchandise, has been notable and appears to be as strongly linked to weak
consumer confidence as it is to underlying economic issues.
With the impact of Easter having now annualised, the sales trends for the first half of 2017 can now be
reliably assessed and, as we note below, the prognosis is disappointing. The Group has however, grown
market share in all key general merchandise categories – our share in major appliances, for example, has
increased by 5% in a year. Similarly, our retail food sales growth is very encouraging and is
outperforming the reported sector’s market growth.
For the first 21 weeks of the 2017 financial year, Massmart’s total sales growth was 0.3% and
comparable sales declined by 1.9%, with year-to-date sales inflation of 4.4%. These Group figures mask
divergent sales trends across geographies and categories. Total and comparable sales from our South
African (SA) stores was 1.8% and -0.4% respectively, while the same figures from our ex-SA stores were
-13.3% and -15.7% respectively in Rands. Total and comparable sales from our ex-SA stores were -0.4%
and -0.7% respectively in constant currency.
Massdiscounters’ total sales declined by 1.3% and comparable sales declined by 3.3%, with inflation of
1.6%. Game South Africa’s total sales growth was 2.1% and Food and Liquor sales in this business unit
continued to perform strongly. Game Africa’s total Rand sales declined by 11.4% but were up 8.6% in
local currencies. The new SAP point-of-sale roll-out was completed successfully across all Game and
Dion Wired stores in SA.
Masswarehouse’s total and comparable sales growths were 3.9% and 0.7% respectively, with inflation of
4.9%. Food and Liquor sales growths are stronger than General Merchandise. Online sales are 48.0%
higher than those of the same period in the prior year.
Massbuild’s total sales growth was flat and comparable sales declined by 0.1%, with inflation of 5.1%.
Total sales growth in SA was 2.0% while ex-SA’s total Rand sales declined by 21.0% and by 0.1% in local
currencies.
In Masscash, total sales declined by 1.3% and comparable sales declined by 3.7%, with inflation of 5.5%.
Wholesale sales have been affected by both suppliers and customers being cautious about the impact of
the price-disinflation and -deflation across many commodity lines which causes them to reduce their
purchases and inventory levels. Sales from the ex-SA stores have declined at rates similar to those seen
in the other divisions, while sales in the SA business have also declined slightly. The newly rebuilt Jumbo
Crown Mines store was opened in late April 2017 and has traded very well subsequently. In Masscash
Retail, total sales growth continued its positive trend.
The current levels of political, business and consumer uncertainty make it difficult to provide any useful
trading expectations for the remainder of the 2017 financial year, but we do not expect the SA
consumer economy to show any noticeable improvement during this time. As regards our stores in the
ex-SA countries, this second quarter marks the annualisation of the severe currency weakness in many
of those countries and so it is possible that our reported Rand sales will soon show a relative
improvement in growth.
Our next sales update is for the 26-week period ending 25 June 2017, to be released in mid-July.
The above information has not been reviewed and reported on by the Company’s external auditors.
Johannesburg
25 May 2017
Sponsor
Deutsche Securities (SA) Proprietary Limited
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