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Massbuild performs below expectations

Builders Warehouse 2

The share price of Walmart’s African subsidiary, Massmart, took a hit yesterday after the company released a trading update which fell below market expectations. Sales for the 26 weeks to June 26 were forecast to grow to R42.3bn, an 8.7% rise from the previous comparable period.

The company’s share price fell 2.5% at 9.15am after Massmart’s announcement.

Kaeleen Brown, a retail analyst at Standard Bank Securities, said the most worrying aspect was that there was also quite a slowdown at Masswarehouse and Massbuild, the two stalwarts in the Massmart stable.

Brown said Masswarehouse, which included Makro and The Fruitspot, made up about 50% of the group’s operating profit, while Massbuild, with its Builders Warehouse brand, constituted about 27%.

Sales performance of the grocery division was also affected with Masscash — which included stores CBW, Jumbo, Cambridge Food, and Shield — decreasing by 10.3%, compared with 10.9% growth in the previous quarter.

The loss of momentum in consumer spending has affected SA’s retail environment deeply. Reserve Bank figures show that consumer spending fell to R1.85m in the first quarter of 2016, compared with R1.86m in 2015’s final quarter.

Source: Business Day Live - South Africa

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20 July 2016

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