“South African retailers are facing a weaker consumer environment, accompanied by some inflation volatility, higher interest rates and negligible economic growth, all factors which seem likely to persist for 2014 and possibly 2015,” the company said.
“In response to the environment, the Massmart divisions managed costs tightly and concentrated on offering customers value through exciting deals, innovative promotions, keen pricing and collaboration with suppliers. We sought ways to make it easier for customers to shop with us.”
The South African-based management group also stated that the knock-on effect of the five-month long mining sector labour strike has possibly had a greater adverse impact on South African industries than is fully understood.
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[DATA MSM:Massmart] chief executive, Guy Hayward said, “The gradually tightening interest rate cycle will make things more difficult for middle-income customers and possibly those in the upper-income brackets. However, for the meantime, upper-income customers appear resilient.”
Massmart reported 10.1 per cent growth in revenue for the 26 weeks ending 29 June 2014. Revenue increased to 35 billion rand from 32 billion rand for the same period in 2013.
However, profit before taxation decreased by 27 per cent to 540 million rand in 2014 from 739 million rand in 2013.
Diluted basic earnings per share also decreased, from 219 cents in 2013 to 159 cents in 2014 and an interim dividend of 146 cents was declared.
“Given the difficult consumer environment it seems likely that these sales trends will continue for the remainder of 2014 and so we remain focused on offering our customers exceptional value and innovation,” Massmart said.
“We expect that the results for the full-year will be affected by the ongoing weak economic environment as experienced in the interim reporting period.”