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Wal-Mart’s Massmart Profit Drops on Currency Pressure

By Steve Wynne-Jones
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Wal-Mart’s Massmart Profit Drops on Currency Pressure

Massmart Holdings, the South African food and goods wholesaler controlled by Wal-Mart Stores, said first-half profit fell 26 per cent  as price competition curbed margins and other African currencies weakened against the rand.

Profit excluding one-time items fell to 269.3 million rand ($20.6 million) from 364 million rand a year earlier, the Johannesburg-based company said in a statement on Thursday. That compared with a 26 percent decline a year earlier. Sales rose 9.1 per cent to 39 billion rand.

South African unemployment of 25 per cent, power cuts and rising fuel prices are putting pressure on shoppers to cut down on major purchases. South African consumer confidence dropped to a 14-year low in the second quarter of this year. Massmart faces strong competition throughout its business, it said.

“All participants -- suppliers, service providers, retailers and wholesalers -- are competing keenly for profitability and market share, causing heightened margin pressure across the retail value chain,” Massmart said.

The company made a net foreign exchange loss of 106.7 million rand, “mostly as a result of the weakening of the average basket of African currencies against the rand,” it said. The weakening of the local currency against the U.S. dollar exacerbated the loss.

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The shares have decreased 19 per cent this year, the biggest decliner on the FTSE/JSE Africa General Retailers Index.

Bloomberg News, edited by ESM. To subscribe to ESM: The European Supermarket Magazine, click here.

 

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