African retailer pushes growth

Wal-Mart unit’s sales rise 15.6%

— Massmart, the South Africa-based retailer that is majority-owned by Wal-Mart Stores Inc. of Bentonville, reported Wednesday that sales increased 15.6 percent for the fiscal year that ended June 24.

Sales at stores open at least a year, a key measure of success in retailing, rose 9.6 percent. Same-store sales exclude data from stores that opened or closed during the period.

For the eight weeks that ended Aug. 19, total sales were up 17.7 percent and same-store sales rose 9.8 percent.

Massmart said the company’s results were driven by an investment of $206.2 million to position the company for long-term growth, including conversion of store space for the sale of groceries, and creating new distribution-center infrastructure, which contributed to a 19.8 percent increase in costs.

“The capital investments, our broad and growing relationship with Wal-Mart 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,” Grant Pattison, chief executive officer, said in a news release announc-ing the results.

Pattison said the retail food expansion drove sales and market-share growth but reduced margins in the short term.

Massmart said it has rehired 222 of the 503 employees who were laid off when the sale of a majority share of the company to Wal-Mart was announced. Wal-Mart owns 51 percent of the company.

“Headline” earnings, which exclude some items such as profits or losses from termination of discontinued operations, rose 38 percent for the year. Massmart opened 25 stores, acquired 15 stores and closed five during the year.

According to its website, Massmart operates nine wholesale and retail chains, totaling 330 stores in 12 countries in sub-Sahara Africa, with the largest concentration in South Africa.

The company says it employs more than 30,000 fulltime and part-time workers.

Camille Schuster, who runs the consulting firm Global Collaborations and is a professor of marketing and international business at California State University San Marcos, said the potential for retail growth in Africa is good, though the region is challenged by lack of infrastructure such as roads, volatility in governments and a poorly developed financial system.

“There really hasn’t been any push,” she said. “Wal-Mart getting in there now is very smart. It gives them the potential to be a real leader.”

Massmart has identified about 15 locations in Africa where it wants to expand, according to MarketWatch, abusiness news service of Dow Jones & Co. Approval already has been gained for stores in Kenya and Angola, Massmart said.

The company said that, legally, Wal-Mart’s purchase of a controlling stake has beencompleted except for a final decision from the nation’s Competition Appeal Court on establishment of a supplier development fund.

Massmart operates retail formats that include Massdiscounters, which includes Game, a discount retailer that sells general merchandise and nonperishable groceries, and DionWired, an electronics and appliances chain that attracts middle- to upper-income shoppers; Masswarehouse, a warehouse club format; Massbuild, a home improvements and do-ityourself format; and Masscash, which runs a wholesale foods and cosmetics business and retail outlets.

Business, Pages 25 on 08/23/2012

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