Massmart strikes while the iron is hot

The transaction is pending approval by the Namibian Competition Commission and the amount is still to be disclosed.

A retail analyst said that the acquisition was consistent with Massmart's African expansion plans announced earlier this year.

"In February Massmart indicated that it would focus on expanding its portfolio in sub-Saharan Africa. The group had their sights on Cameroon, Namibia and Angola," the analyst said.

He added that the Massbuild division, which includes Builder's Warehouse, was performing exceptionally well and that if approval was granted it would bode well for Massbuild's overall growth.

Pupkewitz Megabuild is one of Southern Africa's largest building supply chain operations and has been providing building products and building supplies since 1925.

Increased sales

Massbuild increased total sales by 13.9% for the 52 weeks to 27 June 2010.

Commenting on Massbuild's performance, Paul Bosman, an equity analyst from PSG Tanzanite said:

"I think the low interest rate is the most important driver of this strong sales performance. Massbuild's customer base is largely the bonded residential market, and the discretionary spending of this market is very sensitive to the interest rate.

This division has also gone through a change of management, which could also be a contributing factor to this segment's strong recovery."

After tepid interim results earlier in the year, Massmart Holdings, the third largest distributor of consumer goods in Africa, last week announced that in the 52 weeks to 27 June 2010, total sales increased 10.1%, to 47.5 billion rand which was larger than the 8.6% gain of 39.3 billion rand reported for the 44-week period in May.

"During the last couple of weeks of Massmart's financial year there has been a very good improvement in like-for-like sales figures at Massdiscounters," Bosman said.

Total sales in the retail giant's Massdiscounters division grew by 8.5%.

Contributors

Bosman said that a large contributor to this division is Game and the increase in sales indicates that consumer spending on highly discretionary semi-durables has turned the corner.

Game is a discount retailer of general merchandise and non-perishable groceries for home, leisure and business use.

The group's Masswarehouse division, which operates 13 Makro warehouse stores, reported a total sales increase of 3.6%, while Masscash, which includes Jumbo stores and CellShack, increased sales by 14.5% from 13.9% for the same period last year.

"The effect of the longer school holiday is hard to estimate but certainly also played a role in Massmart's strong performance over the last couple of weeks," Bosman added.

World Cup boost

World Cup spending euphoria has also given the retail giant a much-needed boost - Massmart made between 200-300 million rand in extra sales during the tournament.

The group said that the three to four weeks of sales during the 2010 FIFA World Cup would slightly boost turnover in the second-half of the year.

Earlier this year, Massmart released lacklustre interim results for the six months to end-December but said it was hopeful for a turnaround.

Massmart shares were last down 12 cents to 122.13 rand, but it is well up from the 116 rand level struck on 1 July.