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Massmart profit misses the mark

Aug 22 2012 08:16 Reuters

Company Data

PICK N PAY STORES LIMITED [JSE:PIK]

Last traded 57.90
Change 0.9
% Change 0.02
Cumulative volume 620124
Market cap 28.22bn

Last Updated: 02/09/2014 at 04:25. Prices are delayed by 15 minutes. Source: McGregor BFA

MASSMART HOLDINGS LIMITED [JSE:MSM]

Last traded 129.89
Change -0.89
% Change -0.01
Cumulative volume 404594
Market cap 28.20bn

Last Updated: 02/09/2014 at 04:25. Prices are delayed by 15 minutes. Source: McGregor BFA

SHOPRITE HOLDINGS LIMITED [JSE:SHP]

Last traded 147.00
Change 0.68
% Change 0.00
Cumulative volume 390581
Market cap 84.21bn

Last Updated: 02/09/2014 at 04:25. Prices are delayed by 15 minutes. Source: McGregor BFA

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Johannesburg - Walmart’s South African unit Massmart Holdings [JSE:MSM] posted a 6.1% rise in full-year profit, falling well short of expectations as weak selling prices and rising costs weighed.

The nation’s third-largest retailer by market value said diluted headline earnings per share were 619 cents in the year to end-June, well-below a 656 cents in Reuters poll of 13 analysts.

Stripping out costs related to Walmart’s $2.4bn takeover of a 51% stake in Massmart, headline EPS increased 30.3 cents.

Consumer spending is improving in Africa’s biggest economy due to decades-low interest rates and above-inflation wage hikes, but the outlook is uncertain due to high debt levels and chronic unemployment.

South African retail sales jumped 8.3% year-on-year May, official data showed, beating the 4.7% growth economists had expected.

But Massmart has failed to fully capitalise on improving consumer spending as it spends a chunk of its cash expanding into food retail to take on established players such Shoprite Holdings [JSE:SHP] and Pick 'n Pay Stores [JSE:PIK] .

The company was also hit by weak selling prices, which averaged 1.8%, and above-average increase in the prices of electricity.    

Massmart said sales rose 15.6% to R53bn.

Rival Shoprite also missed forecasts with a 20% rise to 607 cents in full-year profit on Tuesday, as nagging unemployment and rising debt levels put pressure on consumer spending.

Shares in Massmart are little changed so far this year, underperforming a 10% rise in the JSE Top 40 - (Tradeable) [JSE:J200] index.


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