South African retailer Massmart – which owns brands such as Game, Makro and Builders Warehouse – is aiming to open five new stores on the continent (outside of South Africa) over the next two years.
The company released its half-year results this week, which revealed a 23.2% growth (16.5% in constant currencies) in total sales from its stores outside of South Africa. It highlighted Nigeria, Ghana, Mozambique and Zambia as possible markets for further expansion. This is in spite of Massmart reporting foreign exchange translation losses and lower South African rand profits due to local currency depreciation in key African markets. For example, Nigeria’s naira fell 43% against the rand this year, while Mozambique’s metical dropped 30%.
“We maintain our optimistic but measured approach to growth in Africa outside of South Africa,” said the group’s communication manager, Annaleigh Vallie.
“We think there are significant opportunities for Builders Warehouse as evidenced by its performance. We also see opportunity for a hybrid retail/wholesale format.”
Massmart’s African expansion is mostly focused on its Builders Warehouse and Game brands, and it currently has 38 outlets in 12 countries outside of South Africa. Over the past year it has launched a handful of stores in new cities, including a Game in Matola (Mozambique) and Abuja (Nigeria), as well as a Builders Warehouse in Zambia’s capital Lusaka. Yesterday Massmart opened a Game store in Lekki, Nigeria – its fifth in the country.
“Builders Warehouse has been incredibly successful with city expansion into three countries (Botswana, Mozambique and Zambia) resulting in excellent sales and margin growth – [with] R1bn sales out of six stores in just three years,” continued Vallie.
However, despite the company’s optimism around growth in Africa, there has been speculation that US heavyweight retailer Walmart might sell its majority stake in Massmart – just five years after it paid R16.5bn (US$2.5bn at the time) for it at R148 per share. Today the share price sits at around R129.
However, Walmart CEO Doug McMillon still flogs the African market as an attractive opportunity for Massmart.
“South Africa is a terrific market and it gives you something to work with, but our aspirations are for the sub-Saharan African region,” McMillon was quoted as saying by Bloomberg during the Consumer Goods Forum’s global summit in Cape Town in June.
“I get really excited about it. You can put me into that optimistic group.”