Massmart sales update please Mr Market

Yesterday we received trading updates from 2 of our big retailers, namely Massmart and Woolworths. Let's start with Massmart.


"For the 53 weeks to 29 December 2013, Massmart's total sales increased to R72.2 billion, representing total growth of 9.7% on the 52 weeks to 23 December 2012, with product inflation estimated at 2.7%.


Comparing this year's 52-week period to the 2012 52 week period shows total growth of 7.5% and comparable store sales growth of 3.8%."


These numbers are encouraging, for the first time in a while we have seen a better than expected update from Massmart following the big transition after being acquired.


It is also very interesting to see the breakdown divisionally.


"Massdiscounters increased by 8.6% (1.0% comparable) with inflation of 0.5%; Masswarehouse increased by 14.1% (4.0% comparable) with inflation of 2.1%; Massbuild increased by 11.9% (8.2% comparable) with inflation of 4.1%; and Masscash increased by 6.5% (3.8% comparable) with inflation of 4.2%."


As you can see, the biggest comparable store growth came from Massbuild. People are still jam packing those Builderswarehouse parking lots to buy all sorts of home improvement goodies. It is also interesting to see where inflation is having an impact. Masscash compromises those very low cost bulk retailers which operate in the poorer arrears. Unfortunately margins are small so increased costs fall straight on the consumer. A direct example of how the poor suffer more from inflation. The building division also had high inflation, probably because much of those goods are imported.


I am pleased to see these numbers, Massmart is a very broad based retailer and targets everyone operating in the South African economy. It tells me that the consumer is not as weak as previously thought. The stock was up over 5% on the day.