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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