Massmart profit severely hit by weak sales, losses
By Sandile Mchunu - Aug 1st, 09:16
Massmart Holdings' share price declined by more than 17percent on the JSE after the group said it expected to report a decline in earnings across all of its four divisions for the six months to end June, mainly impacted by losses in Massdiscounters.
Its losses are expected to widen to R395million and R425m compared to last year’s loss of R95m.
The loss in the division is expected to turn the group’s headline earnings of R204.1m reported last year to a loss of between R530m and R550.4m during the period.
The slide in Massdiscounters has seen its chief executive Albert Voogd resign in July and be replaced by an interim chief executive Andrew Stein.
Massdiscounters also appointed Riaan Turton as finance director and Kathrine Madley as marketing director as well as Neville Hatfield as merchandise director with effect from July.
The share price took a knock after the release of the trading update as it slid to R43.77 a share, down from Monday’s closing price of R58.90 before closing at 49.80.
Massmart said the expected results were disappointing for the group. “Margins were lower-than-anticipated across all divisions in May and June, which resulted in a disappointing group financial performance for the six months to end June,” the group said.
Massmart operates four divisions which include Massdiscounters, Masswarehouse, Massbuild, and Masscash.
Masswarehouse is expected to report a trading profit of between R320m and R370m but is 24 to 34percent lower than last year.
“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,” the group said.
Massbuild will report a trading profit of between R238m and R266m, which is 5 to 15percent lower than last year as a result of lower sales and expense growth.
Masscash is expected to report a trading loss of between R180m and R210m compared to last year’s 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,” the group said.
Masscash chief executive Kevin Vyvyan-Day also announced his resignation with effect from the end of August and will be replaced by interim chief executive Deepa Sita.
Massmart expects to release its results on August 29.
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