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Massmart’s retail turnaround on track

Builders Warehouse

South African general retailer Massmart reported a 10.4% growth sales to R78 billion for the full-year to December 2014, citing an improvement in trading and economic conditions.

Massmart’s consumer goods and home improvement supplies business recorded better performance with a comparable store sales growth of 7.5% for the year.

The Walmart-owned retailer posted a 10.2% fall in headline earnings per share.

Despite a bleak domestic economy which has hit consumer spending, Massmart is upbeat about the turnaround of its operations.

Game

The group took a knock recently from its Game operations which have seen improved trading conditions for the business unit.

Game which falls under the company’s Massdiscounters division reported growth in comparable sales of 8.1% in South Africa. The division saw total sales for the year increased by 10.2%.

“Game South Africa had a strong fourth quarter, growing profit and emphasising the potential of retail food, while the performance of Game Africa was impacted by slow starts to new stores and weaker currencies,” says Massmart CEO Guy Hayward.

Game’s fresh food offering Foodcorp continues to have a positive impact on general merchandise business, says Hayward. In 2014 Game saw the roll-out of Foodcorp across its 66 stores. Food and liquor sales represent 19.4% of Game’s total sales.

Hayward says Game’s retail food growth continues, as it is now worth R3.2 billion.

DionWired

DionWired which also falls under the division saw an improvement in trading conditions with a sales growth of 13.2%. “This brand (DionWired) remains the destination store within its category,” says Hayward.

DionWired’s efforts to move to omnichannel retailing has resulted in the store’s online offering representing 2.3% of total sales.

Makro

Makro which falls under the Masswarehouse division saw total sales increased by 11.8% and comparable numbers by 10.7%. The division also has brands like Fruitspot and a liquor offering.

“Our food business continues to benefit from increased sales to retail customers and we have gained additional share in the retail and wholesale liquor markets,” the company says.

Despite the wholesale and retail food environments being competitive, the Masscash division with brands like Jumbo and Cambridge Foods reported sales growth of 8%.

Massbuild

The Massbuild division (including Builders Warehouse, Builders Express, Builders Superstore and Builders Trade Depot), is the strongest division on a sales growth basis. Massbuild grew total sales for the year by 14.6%, while comparable sales increased by 9.1%.

The new low-cost Builders Superstore format, which competes with the likes of Cashbuild and Build it “continues to exceed expectations.” Massmart says it will expand stores beyond the Gauteng region with eight new stores in the pipeline.

Hayward says the company is still concerned about the fragile South African economy. The lower oil price has been a driver of sales within the Massmart group but the increase in the fuel levy will take those sales away, says Hayward.

“We remain focused on our key strategic priorities: Operating excellence, growing retail food in South Africa, growing into high-potential markets in sub-Saharan Africa, building a profitable online presence; and ultimately improving group profitability,” Hayward explains.

Massmart has maintained the dividend at the same level as the prior comparable year, with a cash dividend of 275 cents per share.

Source : Moneyweb
www.moneyweb.co.za/news/companies-and-deals/massmarts-retail-turnaround-on-track/

27 February 2015

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