Massmart expecting good festive sales

Chief executive Grant Pattison said in a statement on Wednesday, 21 November 2012, that rising food inflation would support food sales growth‚ but increased spending on food may put pressure on general merchandise sales.

The home improvement market appeared to be improving‚ albeit slightly‚ he said.

The group‚ which was acquired by US-based Walmart last year‚ has started expanding into the food business in competition with local retailers such as Shoprite.

Chris Gilmour‚ an analyst at Absa Investments‚ said the forecast seemed more or less in line with his own expectations for similar or slightly above retail sales in the Christmas season compared with last year.

"I don't expect a bumper season‚" said Gilmour.

Gilmour said consumer confidence was relatively positive even though consumers were under "relentless pressure" from rising costs such as food‚ fuel and utilities. There was also increased competition among retailers.

Pattison said sales growth in food and home improvement operations were strong while there had been some weakness in general merchandise sales growth‚ particularly in the last few weeks.

He said in the 20 weeks to 11 November this year‚ Massmart's total sales growth was 16.2%.

Six stores were opened since July year‚ which represented a 3.3% increase in trading space. These were two Makro stores‚ three Game stores and one Rhino store.

Four Game stores were converted to Foodco‚ giving Massmart 24 Game Foodco stores.

Pattison said credit extension in the low- and middle-income markets appeared near saturation‚ although middle- to upper-income markets still had some capacity to take on more credit‚ the group said.

Labour unrest in some industries affected sales in certain regions‚ but it did not have a material effect on the group as a whole.

Pattison said 237 employees were reinstated in line with the Competition Tribunal's requirements.

An additional R140m non-cash charge would be raised in the six months to December this year arising from the Competition Appeal Court's ruling on the supplier development fund.

"The integration process with Walmart is complete and while ongoing annual costs of about R50m a year are expected from 2013‚ we will disclose these costs separately for the last time in December‚" Pattison said.

Massmart is changing its financial year-end to December to align with Walmarts's financial year-end.