MARIKANA, South Africa--South African retailer Massmart Holdings
Ltd. (MSM.JO ) Wednesday reported a rise in full-year sales and
profit and said it plans to open 40 new stores over the next 18
months, despite a pressure on margins, as it seeks to boost market
share following its integration with U.S.-based Wal-Mart Stores
Inc. (WMT)
Sales rose 16% to 61.2 billion rand ($7.39 billion) while
headline earnings, a common measure of profit in South Africa that
strips out some items, was up 8.9% to ZAR1.36 billion in the year
ended June 24. The company is in the process of aligning its
earnings report to the Wal-Mart financial year that ends in
December.
Earlier this year, Wal-Mart completed a deal to buy a majority
stake in Massmart. Chief Executive Grant Pattison said the
integration should boost profit at Massmart from 2014, when the
integration process is complete. In the meantime, the company is
focusing on growing sales and market share and opening new
stores.
The company has already invested ZAR1.7 billion rand on
infrastructure and building 25 new stores in the year and will
spend ZAR2.6 billion in capital on opening 40 new stores. The
company said it has targeted about 15 sites in parts of Africa it
wants to add stores in but needs to secure property rights. Mr.
Pattison said the company has approved store openings in Kenya and
Angola and plans news stores in Mozambique and Zambia over the next
year. He said the companies want to take the model of discount
supermarkets to west and east Africa.
Wal-Mart's entry into South Africa was viewed as a spring board
for growth into the rest of the continent, which is pinning better
economic growth than many parts of the world.
Difficulties in securing property rights in the rest of Africa
has, however, slowed the company's expansion down but Mr. Pattison
said Massmart should open five new stores in the next 18 months
outside of South Africa.
"With the new relationship with Wal-Mart I think we are
positioned for significant market share growth over the short
term," Mr Pattison said. He said, however, that Wal-Mart's ability
to source goods cheaper than anyone else has been
"overestimated."
While Massmart is pushing ahead on expansion, it warned that
middle income consumers -- some of its core shoppers in South
Africa -- are coming under pressure. Inflation in the past
financial year rose 1.8% and Mr. Pattison said over the next 18
months it will increase particularly given the shortage of
corn.
"Net margins won't rise over the next 18 months but we will
focus on growing sales and market share," Mr Pattison said.
Write to Devon Maylie at devon.maylie@dowjones.com