Massmart gains from foreign-exchange windfall
WALMART-owned Massmart on Thursday reported an impressive 51.2% rise in its first-half headline earnings per share to 225.2c, thanks to a "large positive swing" in the exchange rate as the rand weakened against African currencies. But excluding its foreign exchange windfall, the retailer said its headline earnings per share fell 9.9% to 180.8c, reflecting a decline in South Africa’s economic growth and in disposable income levels — a situation that was not expected to improve in the short term. The retailer is not alone in bemoaning the state of trading conditions.
Total sales grew by 8.9%, while comparable sales inched up 5.5%. Operating expenses rose faster than sales, which saw the group’s operating profit before foreign exchange movements slipping 1% to R730m.
Daniel Isaacs, an equity analyst at 36ONE Asset Management, said the group’s results were "disappointing". "The Walmart integration costs were higher than the market had expected," he said.
"Everyone’s been waiting for efficiencies to come through such that the growth in the operating line is larger than the growth in the revenue line … guys are putting their hope on margin expansion, but that’s now in question. Game also came under significant pressure.... Read the full, comprehensive news article and discuss at Business Day