(Adds company, analyst comment, detail)
JOHANNESBURG Feb 23 South African retailer
Massmart plans to increase its stores outside its home
market by more than a quarter in the next two years, the company
said on Thursday as it reported an almost 16 percent rise in
Massmart, majority-owned by Wal-Mart Stores Inc, has
operations in 13 African countries but still makes more than 90
percent of its sales in South Africa.
"We are going to add 26 percent to our African space in the
next 2 years," chief executive Guy Hayward said in an analyst
presentation referring to markets outside South Africa.
Massmart, which sells food, liquor, appliances and
electronics, has closed some its South African stores as a
slowdown in economic growth affected parts of the country's
Spending by South African consumers has been constrained by
inflation, higher debt servicing costs and an unemployment rate
of more than 25 percent.
But the company managed to produce strong profit growth
partly by containing costs and increasing the profitability of
its wholesale and discounting divisions, which had been
underperforming, analysts said.
Massmart reported diluted headline earnings per share of
587.6 cents for the 12 months to end-December, compared with
508.8 cents a year earlier, reflecting buoyant food and liquor
sales in its home market.
Shares in Massmart rose to a 6-month high of 145.19 rand on
the results, but pared gains to stand 8 percent higher at 142.32
rand by 1018 GMT, compared with a 0.2 rise in the JSE's
"I suspect that you are starting to see a shift in mix
between the structurally challenged wholesale business and the
fast growing food retail stores which is aiding profitability,"
Investec Asset Management analyst Unathi Loos said.
Massmart increased its total retail space by 1.2 percent
over the period, closing 10 of its more than 400 stores, and
"We are pursuing Africa for growth and diversification,"
Hayward said, adding that the company would try smaller store
formats to get closer to its customers and reduce dependence on
shopping mall owners.
Massmart will not venture into countries it does not already
operate in, Hayward said.
"Whether investing in the rest of Africa is a good idea or
not, depends on your investment horizon … I am optimistic,"
Investec analyst Loos said.
(Reporting by TJ Strydom; Editing by Jane Merriman)