Massmart ups profit on forex

Johannesburg - South African retailer Massmart Holdings [JSE:MSM] reported a 19% rise in first-half profit on Wednesday, helped almost entirely by favourable currency swings as higher costs and discounts weighed.

Massmart, 51% owned by US retail giant Walmart, said diluted headline earnings per share totalled 407.3 cents in the six months to end-December compared with 343c a year earlier.

Headline earnings per share were boosted by a R82.4m foreign exchange gain, without which they would have shown a slight 2.9% rise.

While consumer spending is slowly recovering thanks to low interest rates and above-inflation wage increases in South Africa, Massmart has yet to see the benefits flow through to profit as it spends on an aggressive price and expansion strategy to double market share in food sales.

Massmart said sales increased 15% to R31.4bn helped partly higher higher food inflation.

South African retail sales jumped 8.7% year-on-year in December, beating the 6.5% increase economists had expected.

Both Massmart and parent Walmart are awaiting judgments on appeals from both the South African and the Namibian governments, which are seeking to block or attach more conditions to the $2.4bn deal.

Shoprite Holdings [JSE:SHP], a domestic merchant seen likely to lose the most from discounter Walmart's entry into the country, boosted profit by 18% on Tuesday.