Why Massmart’s share price surged
CEO Guy Hayward says over the next two years the group’s African footprint will be increased by 25%
Stronger-than-expected full-year earnings in the 12 months to end December 2016 saw the Massmart share price surge 10.28% on Thursday to close at a six-month high of R145.25. Head-office cost-cutting and improved merchandising helped to counter the bottom-line effect of muted South African consumer demand and the relatively strong rand, which dulled profit contribution from outside SA. Diluted headline earnings were up 13% to 630.9c per share. Total sales were up 7.7% on the year to R91.3bn. Product inflation of 6.7% and an increase in stores meant like-for-like sales declined in real terms. Trading profit, excluding foreign exchange movements and interest, rose 12% to R26bn. In SA, food and liquor sales grew 11.7%, while general sales increased by only 1.5%. "Very low discretionary spending by consumers" continued to affect general merchandise, the management said. In the rest of Africa, where slightly more than 50% of the group’s sales are general merchandise and home improvement,...
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