Massmart's growth zone expects no jingle bells

© Paul-Andre Belle-Isle – 123RF.com

"Absent of any major shock, Christmas sales performance should be in line with current levels," the retailer said in a sales update showing positive volume growth across its divisions over the 45 weeks to 8 November.

Yesterday's update said total sales had increased to R69.8bn, representing growth of 8.7%, and comparable store sales had risen 7%. Product inflation for the period is estimated at 3.1%.

"When you look at pricing, in most cases their inflation is quite low and that will obviously support footfall coming through and maybe that's why they have positive growth numbers, but I think that does put a bit of pressure on profitability. You need strong volumes and also a reasonable inflation to get some good bottom-line growth," Sasfin senior retail analyst Alec Abraham said.

The company yesterday hosted analyst store visits in the greater Johannesburg region.

Subsequent to June, comparable sales growth in Game's South African stores had increased marginally, while comparable sales in Game's stores in the rest of Africa slowed slightly, the Walmart-owned group said. Sales at Masswarehouse, which includes Makro and Fruit Spot, rose 10.1%. The company's food wholesale business Masscash reported a total sales gain of 6%. Over the same period, Massdiscounters increased total sales by 9.2%, comparable with inflation of 1.6%. The unit operates two retail formats: Game and DionWired.

"Masscash has picked up nicely, but there was quite a bit of a slowdown in the Massbuild numbers. They're still good and growing ahead of the market, but they have certainly come back a bit.

"We've seen a similar trend in the retail numbers, where spending on hardware has slowed. It shows that while that segment was buoyant for a while with people doing a lot of DIY rather than buying new homes, there is a bit more pressure on disposable income," Abraham said.

In its presentation, the group noted that the environment remained tough due to factors including negative consumer confidence, and the rand falling to its weakest ever level.

"Manufacturing and construction remain weak, with associated job losses. Consumer price inflation (is) rangebound, but food inflation (is) soon to increase - exacerbated by SA's worst drought since 1982," the group said.

In the rest of Africa, while long-term potential remains intact, economies are being affected by lower commodities prices and the strength of the dollar. Total Africa sales growth of 11.1% and rand comparable sales growth of 3.5% were reported for the 45-week period.