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Massmart shares fall despite fair earnings

8 Aug 2012

Massmart's (MSM) earnings update disappointed the market on Tuesday, 7 August 2012, with the shares falling as much as 4.8% when the retailer said integration costs continued to eat into earnings in the 52 weeks to 24 June.

Headline earnings per share would be between 549.4c and 579.7c‚ while headline earnings before Wal-Mart costs and foreign exchange were between 641.4c and 679.9c‚ the company said.

Global retail giant Wal-Mart acquired a 51% stake of Massmart last year. Wal-Mart's entrance into the local market saw competitors scrambling to step up efficiencies in the retail space.

Sasha Naryshkine‚ an analyst at Vestact said it may be an indication that the soft retail environment retailers have been alluding to is starting to show. "It could also mean consumers are not as rosy as everyone expects‚" he said.

"At face value‚ however‚ the numbers are not awful but it does show things have been tough out there."

Earnings would be between 36.5% and 43.5% higher or between R1.145bn and R1.203bn compared to R838.7m in the prior period‚ the company said.

Earlier this year the company said the likely full-year charge for integration would be about R170m. However that number would settle down at about a R50m annual charge‚ chief financial officer Guy Hayward said at the time‚ adding that it would probably take about 18 months to get to that figure.

Last month the US-owned retailer said sales grew 15.5% to R61.2bn in the 52 weeks to 24 June‚ boosted by Makro and its newly acquired Rhino stores.

Sales at Masswarehouse‚ which operates its Makro warehouse stores‚ increased 20.1%‚ faster than the group's overall 15.5% gain for the period‚ the company said at the time.

In Massbuild - which trades in DIY‚ home improvement and builders hardware under the Builders Warehouse‚ Builders Express and Builders Trade Depot brands - sales rose 13% including new outlets‚ and 9.3% excluding new stores.

Meanwhile‚ Massmart's food wholesale business Masscash saw an increase in sales of 16.5% including new stores‚ and 11.6% at stores that had been opern for a year or longer.

At 3:56pm local time on Tuesday, Massmart's share on the JSE was trading at R169.16‚ down R6.34‚ or 3.61%.

The company will release its results on 22 August.

Source: Business Day

Source: I-Net Bridge

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