| Wed 25 Nov 2009, 9:10 | | MSM - Massmart Holdings Limited - CEO AGM statement and trading statement |
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MSM
MSM
MSM - Massmart Holdings Limited - CEO AGM statement and trading statement
Massmart Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number 1940/014066/06
Share code: MSM
ISIN: ZAE000029534
("Massmart" or "the Company")
CEO AGM Statement and Trading Statement
Tactical business planning in Massmart is typically premised on looking at
trading patterns for the same period in the prior year and making allowances for
any changes in key economic trends. This year business planning is extremely
difficult because the speed with which the global economic crisis has
fundamentally changed the environment has made references to the prior year
almost invalid.
To illustrate this, a year ago: we were experiencing high food inflation - we
are now entering food deflation; we had high interest rates - these are now 500
basis points lower; despite high interest rates, cash and credit funding was
readily available - these are now scarce resources; we had good economic growth
- we have just emerged from recession; we had growing employment - it is now
shrinking; and we had a weaker currency.
Given the changes in these important determinants of consumer behaviour, careful
analysis is required to interpret the performance of the Group.
The impact of the global and local recessions on South African consumers is
varied. Those consumers dependant on State grants are benefiting from lower
petrol prices and lower commodity food prices. Those consumers who were
dependant on the income of someone who has now lost their job are devastated.
Those consumers who remain employed are benefiting from lower interest costs,
higher salaries or wages, lower petrol prices and stabilised food prices.
What remains unclear is whether the increased spending of the employed will
exceed the reduction in spending of the unemployed. There is no evidence of
this to date.
For the 21 weeks ended 22 November 2009, Massmart`s total sales growth was 4.9%
and comparable sales growth was -0.7%. Excluding African sales these growth
figures are: total sales 6.2% and comparable sales 0.9%. To assist comparison,
the similarly restated sales growths for week 14, the date of the previous
Massmart sales update, would have been: total sales 6.4% and comparable sales
1.8%.
Financial year-to-date (YTD) sales inflation in the Group is 3.4% (versus
inflation of 11.5% for the prior year`s comparable period).
Total unweighted trading space in the Group has increased by 6.8% since June
2009.
Total and comparable sales growths in each Division for the 21-week period are:
* 1.4%, 1.4% (6.3% YTD inflation) in Masswarehouse;
* 12.2%, 0.0% (1.4% YTD inflation) in Masscash;
* -1.1%, -3.7% (2.7% YTD inflation) in Massdiscounters; and
* 3.3%, -1.2% (3.5% YTD inflation) in Massbuild.
Year-to-date inflation within the categories is:
* 3.8% in Food and declining;
* 2.0% in General Merchandise and declining;
* 2.5% in Home Improvement and declining.
The current strength of the Rand compared to the weakness experienced in the
first half of the 2009 financial year has had the following effect on the Group:
* Those categories which are imported or priced on an import-parity basis,
have gone into deflation resulting in lower nominal sales and gross
margins;
* Massdiscounters` reported African sales are lower, both in local
currency (decline of 3%) and when translated into Rands (decline of
24%); and
* We are reporting foreign currency translation losses versus significant
translation profits.
Internal cost pressures remain driven by wage increases and rampant inflation in
local taxes and energy costs.
Considering the above, our outlook is cautious.
Given the critical Christmas trading period, it is difficult to forecast
Massmart`s earnings with any reasonable degree of certainty, but we expect
earnings per share and headline earnings per share for the six months to
December 2009, including and excluding any foreign currency translation effects,
to be below the comparable prior period.
Whilst there are some signs of improvement in South Africa in Home Improvement
and General Merchandise, we continue to run the business assuming a continuation
of current trends and are focused on margins, costs and inventory management.
Although the timing and strength of the recovery remains uncertain, we are more
confident than ever that we have the management, assets and strategies to out-
perform in the next positive cycle and we continue to invest accordingly.
The financial information contained in this announcement has not been reviewed
or reported on by Massmart`s external auditors.
25 November 2009
Johannesburg
Sponsor to Massmart:
Deutsche Securities (SA) (Proprietary) Limited
Date: 25/11/2009 09:10:29 Produced by the JSE SENS Department.
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