Massmart sales update and management strengthened

Massmart with a whole lot of announcements this morning, firstly a trading update, this is for 44 weeks to end 29 April, so literally ten days or so ago. Total sales for the group at this stage clocked 51.7 billion Rand (FY 2011 sales were 52.950 billion ZAR and FY 2010 sales were 47.451 billion ZAR), which is an increase of 14.7 percent over a prior period, 44 weeks. Kind of a strange sales update, but I guess the nature of retailers is that the work never really ends, you can pretty much in the urban areas of Gauteng shop at any retailer on any day of the week. Even public holidays. There are very few days of the year where shops are shuttered for business, especially up here in Joburg, I pretty much think that shoppers expect that. And I guess in a way it stimulates our economy, meaning that there are more working hours in which economic activity takes place.

And cheaper too. You have heard me say this a number of times too, where I quote Warren Buffett's right hand man, Charlie Munger say that he thinks Costco has done more for society by keeping prices low and by function inflation low, than any other philanthropic cause he knows. And he is right you know, the consumer is always right.

Straight into a divisional sales update, Massdiscounters clocked total sales increase of 10.6 percent (3.8 percent comparable) with inflation of negative 3.8 percent. Price deflation? Prices of a similar item going down is not altogether a good thing for the retailer, but this is certainly good news for the consumer. Margin management is far easier when prices are going up Paul weighed in, this is very true. But you can't charge people more for that bag of rice when the underlying soft commodity price is trending in the other direction. And with regards to some electronic goods, which tend to get cheaper and not more expensive, the big black box discounters struggle there. Think Best Buy.

Masswarehouse saw amazing growth with total sales growth up 19.3 percent, comparable growth sales up 11.2 percent and price inflation a modest 1.8 percent. Across at the Massbuild division, encouraging signs that the building activity and home improvement activity is on the mend (just try and get a parking at a Builders Warehouse on a Saturday morning) with total sales 11.9 percent better, comparable sales 8.2 percent stronger and inflation a very modest 1 percent. At the other division, Masscash saw sales increase by 15.6 percent, comparable sales increased 11 percent with inflation in that division up by 6 percent. Interesting that the food, liquor and groceries warehousing divisions experienced the highest inflation, but that would make sense.

So, on balance I am pleased with the sales update at this point. The market however is not as happy as I am. The stock is down over two percent, which is more than the rest of the market. So, I guess you have to be with Mr. Market on this one. Then next there is a management shuffle at Massmart, not so much a shuffle rather than a strengthening of the team. The current CFO, Guy Hayward will become Chief Operating Officer (a newly created role) and report top Grant Pattison, the current CEO. Pattison is set to (as per the release) "focus on Massmart-Walmart's strategic growth priorities for South Africa and Africa, including the implementation of the Group's Retail Food strategy." So, are we going to see more Game Foodco's and Cambridge Foods? Yes, I am guessing yes. And not just here, elsewhere in Africa too. Lastly the Chief Financial Officer role will be assumed by Ilan Zwarenstein, who has been Group Finance Executive at Massmart since 2006. Experience all around. They are bolstering the board here in anticipation of growth. And that probably means more people are going to be hired. Anyone listening out there? Byron is listening, he is checking out Massmart today and will return with some good investigating in due course. I look forward to it.