JOHANNESBURG, May 25 (Reuters) - South African-based retailer Massmart, majority-owned by Wal-Mart Inc , reported on Thursday a near 2 percent fall in overall same-store sales in the first five months of the current year, as outlets outside its home market underperformed.
Bought into by Wal-Mart seven years ago in a $2.4 billion deal that gave the world’s biggest retailer a foothold in several potentially high-growth markets in sub-Saharan Africa, Massmart has struggled with weakening economies and has therefore become more cautious in its expansion policy across the region.
The company, which sells everything from food to electronic devices and building materials, said comparable store sales for the first 21 weeks of the 2017 fiscal year fell 1.9 percent, with sales in South Africa down 0.4 percent and outside South Africa down by nearly 16 percent.
Sales in South Africa account for 91 percent of total turnover.
Shares in the Johannesburg-based company fell 3.5 percent to 114.86 rand, lagging behind a slightly lower JSE Top-40 index .
Once at the heart of executives’ expansion plans, sub-Saharan Africa growth prospects were dealt a blow in mid 2014 with a fall in the prices of oil and other commodities - export mainstays for many local economies - partly due to a slowdown in demand from leading consumer China.
Massmart’s chief executive Guy Hayward told a shareholder meeting that the company’s performance was also affected by consumers becoming more cautious about spending and after South Africa lost two highly prized investment grade credit ratings last month.
“The unfavourable impact on sales in discretionary product categories, such as general merchandise, has been notable and appears to be as strongly linked to weak consumer confidence as it is to underlying economic issues,” Hayward said. (Reporting by Tiisetso Motsoeneng; Editing by Greg Mahlich)
Our Standards: The Thomson Reuters Trust Principles.