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Brands at Massmart, the country's third-largest distributor of consumer goods, include Game, Dion and Makro. The group's performance gives a good indication of sectoral expectations as it leads the field in real earnings growth.

Audit and business adviser Ernst & Young and the Bureau for Economic Research believe retailers' profit margins would be squeezed this year as they adjust to a lower price environment.

This was expected to knock business confidence, which has been at its highest level in 14 years

In a trading update published yesterday, Massmart said that excluding revenue from Furnex, a furniture
and appliance buying group for independent traders it acquired last January, sales had grown by 28 percent.

The group's growth for the period bettered that of Woolworths Holdings and Truworths International. Woolworths reported a 20 percent growth in sales, while Truworths' tills rang up a 23.3 percent increase.

Simon Susman, Woolworths' chief executive, said revenue during the first quarter had been stronger but remained acceptable for the second quarter and over Christmas, with food outperforming textiles. In line with expectations for the sector, he anticipated a softer second half.

Massmart's executive chairman, Mark Lamberti, said recently that he was 'cautiously optimistic' about prospects in a 'challenging trading environment', although second-half growth was likely to be muted as it was coming off a high base.

Excluding income from acquisitions and new stores, Vianello forecast a 15 percent increase in sales for Massmart's second half.

New revenue sources could increase this by a further 3 percent.

Woolworths' South African operations could expect full-year sales growth in the region of 18 percent.

Truworths was on track for a growth rate of about 19 percent for financial 2003, Lamberti said.

Edgars Consolidated Stores, including Edgars, Jet, Sales House and Cuthberts, reported a 29 percent increase in sales for the third quarter to December.

The group said festive season trading was buoyant, with higher interest rates and double-digit inflation not yet affecting performance. This was reflected in December's 31 percent increase in sales to R1.5 billion.

Interim results for Massmart, Woolworths and Truworths will be released towards the end of February.

Massmart closed unchanged at R18.50 yesterday.