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Johannesburg - After a "stormy" first half, general goods retailer Massmart Holdings has expressed hopes for a turnaround, saying it expects a rise in second-half profit thanks to improving consumer spending and the effects of trading space rollout.
Delivering interim results for the six months to end-December, Massmart CEO Grant Pattison said trading conditions in South Africa have improved over the past eight weeks. The group expects to see recovery in gross margins and profit growth in second-half trading.
That was after the group - whose brands include Game, Dion Wired, Makro and Builders Warehouse - reported a 19.9% fall in headline earnings per share and a 15% decline in operating profit (after foreign currency realisations) over the interim period.
"The worst appears to be behind us," said Pattison, describing the interim period as the toughest ever for the group since listing in 2000. "The consumer seems to have turned."
The upturn in the cycle will help the group re-focus on its growth strategy through the acquisitions of successful independent food retailers.
"With the worst behind us, our attention will be on growing market share through great retail innovation and discipline," Pattison said.
"We will be turning our attention from protecting the income statement and balance sheet to gaining market share and productivity."
Pattison also recommitted Massmart to its African expansion plans, saying Angola, Senegal, Côte d'Ivoire and Cameron were some of the new countries in the group's continental growth plans. It wants to export its Game, Makro and Builders Warehouse brands.
"Trading in Africa is difficult, but we will continue with our expansion. The reason is that our business in Africa provides higher margin and returns," said Pattison.
Currently Massmart operates in 14 sub-Saharan African countries, with 290 stores across a portfolio of nine retail brands. Like food giant Shoprite Holdings, Massmart has been on a continental growth spree despite logistical challenges and weaker currencies to the rand.
Massmart's chief financial officer Guy Hayward confirmed widespread speculation that Wal-Mart had been "shopping around" late last year.
Analysts have previously suggested that Massmart was Wal-Mart's primary target given its Massmart model perfectly fits with that of Wal-Mart.
Commenting on the prospect of being bought by Wal-Mart, Hayward said that the company's directors would act in the best interests of Massmart shareholders. - Fin24.com
