(Recasts, adds analyst comment and Massmart)
By David Dolan and Tiisetso Motsoeneng
JOHANNESBURG Aug 28 South Africa's Woolworths
Holdings posted a double-digit rise in full-year profit
on Thursday as affluent shoppers kept spending on organic jam
and ostrich steaks despite the weak economy.
Woolworths, a food and clothing retailer similar to
Britain's Marks and Spencer, is one of the industry's
few recent strong performers, as most South African consumers
have been suffered under poor economic growth and rising debt.
Its results were in stark contrast to those of another
retailer, Massmart Holdings. The Wal-Mart Stores
unit reported a 25 percent tumble in first-half profit,
reflecting the knock-on effect from waves of strikes this year.
"The higher income group is the only one that really has
disposable income," said Wayne McCurrie, a portfolio manager
with Momentum Wealth. "Obviously, the lower-end consumers, the
debt levels are very high."
Africa's most developed economy barely grew in the second
quarter of this year, data showed this week. Although it avoided
slipping into a recession, South Africa has been battered by
severe labour unrest in the mining and engineering sectors.
The lacklustre growth outlook is particularly bad news for
lower-income workers, who are already struggling to service
their debts. Nationally, household debt averages three-quarters
of disposable income.
Underscoring the problem, this month African Bank
Investments, a lender to low-income borrowers, was
rescued by the central bank after failing under a mountain of
But the malaise appeared to have little impact on
Woolworths. The retailer, which sells upmarket products from soy
milk to organic cotton socks, reported an 18 percent increase in
underlying profit in the 52 weeks to end-June.
After costs related to its recent acquisition of Australian
retailer David Jones, and currency exposure, profit growth was
Massmart, however, was squeezed as cost conscious consumers
felt the brunt of the economic downturn, particularly a
five-month platinum industry strike that ended in June.
"Our stores in towns immediately affected by mining unrest
and regions traditionally associated with migrant mine labour,
have experienced significant sales declines," the company said
in a statement.
Shares of Woolworths were up 2 percent at 79.12 rand at 1402
GMT, while Massmart shares were down 1.6 percent at 132.22 rand.
(1 US dollar = 10.6085 South African rand)
(Editing by Ed Stoddard, David Holmes and David Evans)