SHOPRIT: 17,599 -239 (-1.34%)
Massmart to focus Africa expansion plans on Kenya, Zambia
* Total of 47 new stores over 3-years
* Store expansion targeting Kenya and Zambia
* FY Headline earnings down 31.7 pct
* Cautious outlook for H1 2019
(Recasts with Africa expansion)
By Nqobile Dludla
JOHANNESBURG, Feb 28 (Reuters) - Massmart Holdings Ltd
, one of South Africa's biggest retailers, plans to add
47 new stores between 2019 and 2021, with about a third of the
new space outside its home market.
The company, majority-owned by Walmart Inc, set out
its expansion plans on Thursday along with annual results, where
the retailer reported a 31.7 percent fall in full-year earnings,
sending its shares down sharply.
South African retailers have expanded aggressively outside
their domestic market where growth has stagnated due to the weak
But this has also brought problems. Nigeria and Angola, for
example, have had currency devaluations, which have hit South
Africa's Shoprite Holdings, highlighting the challenges
of doing business in frontier African markets.
Massmart, which has 47 stores in 12 African countries, said
its latest expansion plan would be concentrated specifically in
Kenya and Zambia.
"Zambia and East Africa are interesting to us because
they're not totally dependent on mineral resources like West
Africa is," Group Chief Executive Guy Hayward told Reuters.
"Kenya and Zambia have quite strong tourism industries and
little bit of local industries so the economic play there is a
bit more robust."
Massmart, which sells general merchandise, fresh food,
groceries, home improvements and appliances, plans to open a
Builders Warehouse in Nairobi, Kenya in October, Hayward said.
Four stores, including the Builders Warehouse, will be opened in
Kenya and five in Zambia. Builders Warehouse is Massmart's
building materials and appliances chain.
Hayward said his Africa strategy was about going "slowly and
carefully." He said the company was still committed to Nigeria,
where it has 5 stores.
On South Africa, Massmart said it was cautious about the
outlook for the local consumer economy for the first-half of
South African retailers have struggled to lift earnings and
sales to double digits as an increase in value-added tax,
unemployment and inflation, coupled with higher fuel prices have
reduced consumers' spending power. Massmart generates 91.3
percent of its group sales in South Africa.
Massmart's shares plunged 15 percent in early trade on
Thursday after its headline earnings, which include
restructuring costs, fell to 901.2 million rand ($64.70 million)
for the 52 weeks ended Dec. 30, hit by lower sales, rising costs
Sales for the seven weeks to Feb.17, 2019 were at 11.2
billion rand ($800.88 million), representing total sales growth
of 5.2 percent and comparable sales growth of 3.9 percent.
"We're encouraged by that, but the readings that we're
getting about the economy are negative and muted and so are very
cautious about the next six-months," Hayward said.
($1 = 13.9847 rand)
(Reporting by Nqobile Dludla and Emma Rumney; Editing by Rashmi
Aich and Jane Merriman)
First Published: 2019-02-28 08:39:50
Updated 2019-02-28 15:30:15
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