Although local company Massmart’s sales increased 7.7% to R91.3-bn for the full year ended December 2016, international holding company Walmart got a shock when investment guru Warren Buffett, chairman of Berkshire Hathaway, recently sold his shares in the company and instead invested in airline and Apple stock.
Despite very low consumer spending, Massmart’s comparable sales improved 5.4%, with sales in the company’s major product categories reflecting the economic pressure within the local consumer environment. It especially impacted the general merchandise division, which reported only a small sales increase (1.5%) for the year.
The Massdiscounters division (Game and DionWired) reported a 5.3% increase in sales to R20 544.5-m and 54.8% increase in trading profit to R364.3-m. Within this division there are 165 stores (Game: 141; DionWired: 24). In South Africa, sales growth was higher in the second half of the year, while sales in Rand slowed down outside the country during this time. In 2016, Game opened four new stores, including one in Kenya and one in Zambia, while two DionWired stores opened and two closed. Overall, trading space increased by 2.3% (now 545 094m2).
Masswarehouse, which consists of Makro and Massfresh (fresh produce, meat, and bakery products), reports a 11% increase in sales to R26 270.3-m and a 4.4% trading profit (2016: R1 251.3-m).
Successful promotions like those held on Black Friday led to Game experiencing its highest ever one day sales and Makro breaking all its previous online sales records for one day, which contributed 6% to overall sales. During 2016, Makro’s online sales more than doubled.
“We have had a particular focus on operating profit in recent years, and I am pleased that operating profit continues to improve – this year saw an increase of 15.5%,” says Guy Hayward, CEO for Massmart. “This is noteworthy given the group’s exposure to General Merchandise, which has been significantly impacted by low levels of discretionary consumer spending. We’re excited by the growth of our online offering, which doubled its sales in 2016, and which will continue to grow in 2017 with the launch of Builders online.”
Sales outside of South Africa, which represents 8.7% of total sales, grew 11.2% in Rands (13.4% in constant currencies). The sales were impacted by severe drought in southern Africa, and weak and volatile African currencies. Massmart will be opening 11 more stores outside South Africa through 2017 and 2018, which represents 26.2% of African space growth.
They are beginning to see pleasing results from their continued focus on new retail formats, including the growth of their online offering and African footprint, says Hayward. And although they are hopeful that key economic drivers in South Africa will improve in 2017, their strategic priorities remain unchanged.