Massmart Warns on Losses

South African retail giant, Massmart, has revealed that it is will not achieve forecast earnings when it reports for the six months ended June 30th.

Massmart, which operates through four divisions - Massdiscounters, Masswarehouse, Massbuild and Masscash - is due to report on interim performance on August 29th.

In a trading statement, Massmart said:

"...it is estimated with reasonable certainty that for the six months to June 2019 the Group will report an operating loss, before non-trading items, foreign exchange movements and net interest, of between Rnil and R30m."

The group attributes the anticipated decline to a number of factors: softer sales; weaker margins; store expansion, which created increased employment and occupancy costs; inflation, and increased expenses of around 12% in the last six months.

Massdiscounters is the source of much of Massmart's trouble, the division reporting a trading loss of between R395m and R425m, compared to the June 2018 trading loss of R95m.  

Masswarehouse will report trading profit of between R320m and R370m which is 24% to 34% below the prior period. Much of the lower profitability is caused by the soft sales, margin pressure from the lower sales participation of general merchandise and expense growth caused partly by the new Makro store opened in Durban North in March 2019.

Massbuild will report trading profit of between R238m and R266m which is 5% to 15% below the prior period, as a result of lower sales and expense growth.

Masscash will report a trading loss of between R180m and R210m, below the June 2018 trading loss of R4m. Despite improved sales in the wholesale business, this weak profit performance was caused by margin pressure in that business, weak sales growth in the retail business and expense growth."

Walmart owns 51% of Massmart.

Source : Insight DIY Team 

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