Things are getting worse for South Africa’s consumers – and it’s hurting business
Massmart Holdings has published its interim results for the period ending June 2018, saying that South African consumers are under pressure from the April VAT hike and rising fuel prices, which in turn has had a negative affect on its business and the retail sector in general.
The group reported a flat set of results, with sales on a like-for-like basis increasing by 1.9% over the six month period, to R41.6 billion, with comparable sales up only 0.2%.
Total sales, however, showed a decrease of 2.2%, with comparable sales declining 3.9% over the period.
Massmart owns and operates brands such as Makro, Dion Wired, Home Builders Warehouse and Game.
The consumer environment in South Africa has been difficult and it deteriorated during the period, Massmart said, while the economic conditions in the 12 other African countries where it operates was also strained.
“In South Africa, which generates 91.6% of group sales, with the economic backdrop of a reported 2.2% contraction in the first quarter’s GDP growth, consumers were adversely impacted by the April VAT increase and petrol price increases (which increased 11.1% from January to 1 July 2018),” it said.
The group noted that even lower prices are not attracting more customer spending because of the adverse financial conditions being experienced by lower- and middle-income households.
Spending is being prioritised on food, clothing and transport, Massmart said.
Among its categories, like-on-like sales were as follows:
- Food: -1.5%
- Liquor: +9.2%
- Durable goods: +0.9%
- Home improvement: +7.6%
Online sales improvements
Massmart highlighted significantly improved sales through online platforms, though did not report any sales figures.
According to the group, aggregate online sales grew by 69% over the period, with the average online basket size increasing by 23%, and online platforms receiving 159% more traffic. Online sales represent 1.6% of the applicable totals.
The group noted that while its financial performance for the first half of the year appears flat, the second half of the year will be more likely to drive profitability – particularly the fourth quarter, because it contains the festive period, as well as Black Friday.
“Assuming no further deterioration in the South African consumer economy for the remainder of 2018, Massmart is cautiously optimistic about the full-year’s earnings,” it said.
Read: There could be a problem with adding new items to the zero-rated VAT basket
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