Massmart/Walmart link up said to be delivering goods

Retailing giant Massmart presented its latest financial results in a way that suggests that its relationship with its new parent company Walmart was paying off on all angles.

These were the first set of figures reported by Massmart after the majority of its shares were acquired by the American global giant Walmart. The deal has caused a brawl on the back of concerns that it comes to undermine local industrial development with government departments fighting it through competition law.

In the year ended June Massmart increased sales by 15.6%, operating profit by 21% and headline earnings by 38%.  Excluding costs related to the Walmart transaction, operating profit increased by 3.7% and headline earnings by 8.9%. Comparable sales increased by 9.6% and product inflation remained low at only 1.8%.

Pattison said: “The capital investments, our broad and growing relationship with Walmart, and our renewed focus on operating the business and delivering the strategy, positions us well for both growth in sales and trading margin in the medium to long term.”

Massmart CEO Grant Pattison said he was pleased with the progress made on the group’s four strategic priorities, two of them related to the Walmart transaction and integration. Legally, the transaction has been completed save for the final ruling from the Competition Appeal Court on the Supplier Development Fund.

“We began implementing the Supplier Development Fund in terms of our commitments but, pending the outcome of the Competition Appeal Court ruling, have put new commitments on hold,” said Pattison, adding that of the 503 employees that had previously been retrenched, 222 have been re-employed within the group.

The main integration project, which saw the alignment of governance and the bedding down of basic processes to continually extract value from the transaction, are in place.  The formal integration process will wind down over the next 12 months.

Good progress had also been made maintaining trading momentum, another of Massmart’s strategic priorities. “We completed the Massdiscounters Regional Distribution Centre (RDC) network, opened the first food RDC, improved our competence in Fresh and continued with Food Retail.  Our Private Label and Financial Services penetration also increased during the period,” said Pattison.

The group maintained its Level 4 BBBEE status and its focus on environmental sustainability saw it driving supplier advocacy and reducing its environmental footprint through continued focus on waste management and energy efficiency.

The focus on building constructive relationships with government departments was maintained through partnerships with the Departments of Basic Education, Agriculture, Forestry and Fisheries, South African Police Services, the South African Bureau of Standards, Treasury and SANDF.

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