The Walmart effect in local retailing business Massmart is steadily filtering through with the business announcing that it will introduce George, a clothing brand owned by Asda, Walmart’s UK subsidiary, into Game and Makro stores.
This comes against an extremely tight retail market which caused Massmart operating profit to decline by 1 percent during the 26 weeks ended June 23. The situation was however saved by a weaker rand which delivered a massive foreign exchange gain thus pushing earning to register 51 percent growth.
Announcing first half financial results today, Massmart CEO Grant Pattison, said “George clothing will be available in Game and Makro in November, and will complement our offering and make it easier for our customers to do all their shopping with us. Walmart has assisted us to innovate in this area with very little risk attached”.
Pattison added that a key strategic priority for the Group is the delivery of category innovation in Fresh, Clothing and Ecommerce.
He said progress has been made. Makro will stock babywear while the Essentials range and babywear will be rolled out to 40 Game stores. “Our Fresh store footprint has grown to 89 stores, with Game showing strong comparable food sales growth. The new Makro stores with the enhanced deli, bakery and butchery offering have stimulated sales in other categories in Makro.
“DionWired is now the leading online electronic goods retailer growing online sales 220% on last year. We had 1.2million visitors to our site this year. Our new Buildrite brand represents an exciting initiative to drive building material sales aimed at previously under-serviced areas and in townships. Importantly, it is our first brand to be built on Walmart’s everyday low price philosophy.” The first two Buildrite stores will be opened in November.
Pattison said growth in Africa, outside of South Africa, continued to be a priority for the group, particularly Food Retail expansion. “Following the successful opening of a Builders Warehouse in Francistown, Botswana we have four more Builders stores planned for Mozambique and Zambia and have secured sites in Kenya and Angola for Game. We have developed a new food format which we will be trialling in West Africa before the end of the year and continue to look at east Africa as well.”
Massmart reported a total sales increase of 8.9%, while comparable sales increased by 5.5%. Sales in Massmart’s African businesses represented 7.6% of total sales and increased by 10.7%.
Massmart painted worrying picture of the South African trading environment.
“With most South African GDP forecasts for 2013 being revised downwards, it is clear that economic growth is declining and is below the level required to mitigate the high unemployment rate. The middle to lower consumer economy is being further burdened by sharply rising costs of energy and services, over indebtedness, and tightening credit extension by unsecured lenders”.
“There seems to be a clear pattern in the South African economy that whilst all income groups are under some form of spending pressure, this becomes more severe as one moves down income levels.
Our lower-income brands have therefore done worse than our higher-income brands”.
The company also said it will consolidate its accountability programmes in Supplier Development, Governance, Sustainability and Compliance with the intention of building trust with stakeholders.