NewsSouthern AfricaCost cuts help Wal-Mart's South African arm Massmart

Tue,19Sep2017

Posted on Thursday, 24 August 2017 09:29

Cost cuts help Wal-Mart's South African arm Massmart

By Reuters

 Walmart sign on June 1, 2017, in Hialeah Gardens, Florida, USA. Photo: Alan Diaz/AP/SIPAMassmart Holdings Ltd, the South African arm of Wal-Mart, reported a small rise in half-year earnings on Thursday, helped by cost cuts as cash-strapped shoppers spent warily.

 

Diluted headline earnings per share (EPS) came in at 149.3 cents in the six months ended June, compared with 145.8 cents a year earlier, said Massmart, which sells everything from food to televisions and refrigerators.

Headline EPS, the most widely watched profit gauge in South Africa, strips out certain one-off items.

But sales growth, at 0.5%, was slower than earnings growth, an indication that much of the profit increase came from reining in costs.

Massmart shares down

"The last six months rank among the most difficult trading conditions retailers have faced in recent memory," Chief Executive Guy Hayward said. "The challenging consumer environment demanded an intense focus on expense control."

South African retailers have struggled as consumers battling job losses and high personal debt levels hold back on spending, but Massmart has lagged its closest rival Shoprite both on the stock market and operationally in recent years.

Shoprite, which many investors had expected would lose from the 2011 entry of the world's biggest retailer into South Africa, has defied a recession at home with double-digit earnings growth thanks to a focus on budget-conscious consumers.

Shares in Massmart are down about 25% in the past five years, lagging a nearly one-third rise in Shoprite, Africa's biggest retailer with outlets in countries such as Ghana, Angola and Nigeria.

 

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