July 5, 2004

By Dirk De Vynck

Cape Town - Bulk retailer and wholesaler Massmart is well on its way to again putting in a solid overall annual result performance.

This follows last week's release of a trading statement in which the company said total sales for the 52 weeks to June this year would be up 16.7 percent to about R23.8 billion. This implies that the second-half sales growth was slightly up on the 16 percent increase realised in the first six months of the 2004 financial year.

The annual sales data from the trading statement indicated a better performance from like-for-like sales, which excludes the sales from new stores and acquisitions, in the second half of the financial year.

This showed an increase of 9.9 percent in the period, while sales data at the interim stage showed a rise of 8.5 percent.

Mark Ansley, a retail analyst at African Harvest Fund Managers, said what made the second-half sales performance relative to the first half even more special, was that it excluded sales from the buoyant Christmas season. He said it was quite a feat to show these kinds of sales figures in a environment of almost no inflation.

Evan Walker, a retail analyst at Andisa Securities, also commended Massmart on its sales performance, with the numbers more or less in line with what he had projected.

Walker expected the good showing to continue in the current financial year and Massmart should again be boosted by further acquisitions. Acquisitions added 4.8 percent to the total sales growth for the period under review.

Walker expects further acquisitions to come from the retailer's Masscash division, which houses the group's cash-and-carry operations, and its Builders Warehouse business, which is under the Masswarehouse division.

"The group has already acquired two Mica hardware stores, and could buy further stores to be converted into Builders Warehouse outlets," Walker said.

All in all, Walker expects Massmart, which includes the Makro and Game chains among its operations, to add 15 stores to its tally in the next 12 months.

I-Net-Bridge's consensus forecast from analysts shows that Massmart's headline earnings a share for the year to June is projected to come in at R3.20, a jump of 32 percent on the previous year's headline earnings.

Ansley was not surprised by the optimistic forecast, as all Massmart's divisions seemed to be trading well.

"All the divisions have been growing their operating margins over the past few years, a performance that is expected to continue."

"As for the next 12 months, Massmart's sales should continue benefiting from increased consumer spending as well as the possibility of a slight increase in inflation," he said.

The company's 2004 annual results are set to be published on August 26.

Massmart's shares added 75c to close at R33.50 on Friday, which is just below its all-time high of R34 reached in April.

The rise was in line with the 0.75 percent increase of the general retailers sector.