Get the app today! Download iPhone App Download Android App

South Africa's Massmart Falls To H1 Net Loss As Costs Rise

Published on Aug 29 2019 8:39 AM in Retail tagged: Walmart / South Africa / Massmart / World News

South Africa's Massmart Falls To H1 Net Loss As Costs Rise

South African retailer and wholesaler Massmart Holdings reported a half-year net loss on Thursday hurt by higher costs, foreign exchange losses and slower sales of high-margin goods such as washing machines and flat screen TVs.

Majority owned by U.S. retail giant Walmart, Massmart fell to a net loss for the six months to June 30 of 832.4 million (€49.29 million) versus a profit of 190 million rand a year earlier.

That included the impact of accounting standard IFRS 16.

Total sales rose 5.5% to 43.8 billion rand and the company reported a trading loss before interest and taxes of 1.4 million rand.

Lower Sales

Lower sales of high-margin durable goods and higher sales in lower margin food and liquor categories resulted in gross margins falling by 36 basis points. Expenses rose by 11.8%.

"Cash-strapped consumers continue to spend proportionately more on our sales promotion activities which causes further gross margin pressure," it said in a statement.

The retailer, which owns general merchandise and food wholesaler Makro, is the latest South African retailer to report earnings hurt by domestic factors including higher value-added tax, unemployment, inflation and fuel prices which are reducing consumer spending power.

Compounding pressures on the group is the restructuring of its Massdiscounters and Masscash divisions.

'Unsatisfactory' Results

"The prevailing low growth economy, coupled with various internal missteps, have contributed to an unsatisfactory set of results," group CEO Guy Hayward, who is stepping down at the end of August, said.

"Going forward we see useful opportunity to improve our operating model to position the business to better adjust to the changed economic reality."

Massmart, like Africa's largest supermarket chain Shoprite , is also battling with currency weakness elsewhere in Africa, especially in Zambia and Nigeria. It reported half-year foreign exchange losses of 81.9 million rand.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

Share on Facebook Share on Twitter Share on LinkedIn Share via Email