Massmart Holdings Ltd. (MSM), South Africa’s biggest food and general goods wholesaler, said its profitability is under pressure because of the costs of expansion and selling control to Wal-Mart Stores Inc. (WMT)

Net income rose 21 percent from a year earlier to 893 million rand ($115 million) in the fiscal first half ended Dec. 25, the Johannesburg-based company said in a statement today. Sales increased 15 percent to 31.5 billion rand. Trading profit, or earnings before interest, taxes and some financial items, rose 4 percent to 1.34 billion rand.

Charges in the period included 41.7 million rand related to the sale of a 51 percent stake to Bentonville, Arkansas-based Wal-Mart, Chief Executive Officer Grant Pattison said on a conference call in Johannesburg today. Value from the Wal-Mart transaction should be seen in the second half, he said. Integration costs for the full year are expected to total 170 million rand, he said.

Massmart, which operates 330 stores in 12 African countries south of the Sahara, spent 752.2 million rand, a 33 percent increase, in replacement and expansion costs.

“The current trends of investment in growth and capacity, including integration costs, will continue through to the end of the year, with sales performing well, but with operating margin under pressure,” Massmart said.

Dividend

Massmart declared a first-half dividend of 2.52 rand a share, unchanged from a year earlier. Total sales increased 15 percent in the 34 weeks to Feb. 19, the company said.

The company has five Makro warehouse stores offering fresh produce, including meat products and fruit and vegetables. The company is focusing on expanding this line “because to be successful in food retail, you have to be successful in fresh,” Pattison said.

The company started its first online store in the period. The brand, DionWired, operates in South Africa’s Gauteng province, and has had a “really good response,” with Massmart planning to expand the offering once the parent company’s integration with Wal-Mart is completed, Pattison said.

Massmart fell as much as 1.9 percent to 179 rand and was trading down 1.3 percent as of 10:23 a.m. in Johannesburg. That pared the stock’s gain in the past year to 23 percent, compared with a 33 percent gain for the FTSE/JSE Africa General Retailers Index (JGENR).

via Massmart Margins Under Pressure From Expansion, Wal-Mart Transaction Costs – Bloomberg.

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Retailer Wal-Mart de Mexico SAB (WALMEX.MX, WMMVY) said Tuesday it plans to invest around 19.7 billion pesos ($1.54 billion) in its operations this year.

Chief Executive Scot Rank said the company will open between 410 and 436 new stores to increase its floor space by 12% in Mexico, its main market, while growing its floor space in Central America by 9%.

The retailer will strive to continue growing its same-store sales in Mexico, where the retailer outperformed the broader market in 2011, by reinforcing its low-price strategy in an effort to drive more traffic to the stores, Rank said.

The company also aims to achieve greater cost efficiencies, and to continue to bring the performance of its Central American stores more in line with its Mexican operations.

Walmex, as the retailer is known, invested MXN18.3 billion in its operations in 2011 while opening 441 stores.

For the full year 2011, Walmex’s net profit rose 14% to MXN22.25 billion while sales increased 13% to MXN379.02 billion and earnings before interest, taxes, depreciation and amortization grew 12% to MXN37.42 billion.

via Wal-Mart De Mexico Plans MXN19.7 Billion In 2012 Capital Expenditures | Fox Business.

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Harps Food Stores. Riesbeck Food Markets. Coborn’s. Windham IGA.

These are only some of the retailers whose leaders trumpeted a message at last week’s NGA Show that really isn’t new but seemed fresh.

It goes like this: Independent retailers probably can’t win by fighting bigger competitors on the same playing field. They must instead reach for something different.

Bigger competitors in the spotlight included new formats from Wal-Mart and Dollar General. There’s an urgency because these formats come with expansion plans, but independents seem to have a handle on their rivals’ vulnerabilities.

At one NGA session, Steve Dillard, vice president, corporate sales and business development, Associated Wholesale Grocers, provided the lowdown on some new nontraditional format competitors.

He said Walmart Express exhibits sharp pricing and covers about 80% of needs, but is very limited in food variety.

Walmart Market, meanwhile — twice the size of Express and a successor to Wal-Mart Neighborhood Market — may be more formidable, he said. Also important is Dollar General Market, twice the size of Dollar General’s regular units with more food, he said.

Independents have substantial opportunities against these formats by touting their variety, perishables such as meat and produce, event merchandising, dedicated associates, and community connections, distributors said.

The important point is to avoid getting pulled onto the same price battleground with these competitors. “We must resist the temptation to chase after other folks’ business plans,” said Leo Braido, director of retail, Riesbeck.

You could hear a bit more self-assurance and perspective from independents compared to the days when Wal-Mart first launched its supercenters and later its Neighborhood Markets, introductions that sent jolts through the industry.

“Fourteen years ago, when Neighborhood Market was introduced, Wal-Mart said much the same thing,” recalled Kim Eskew, president and COO, Harps. “It said it would open 200 of them a year in every small town in America. We were worried.”

But today there are fewer than 200.

Perspective is a good thing, especially when it’s mixed with insights into other formats and a self-knowledge of one’s own strengths, as seems to be the case here.

via Independents Take Aim At Wal Mart Dollar General | Viewpoints.

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U.K. supermarket chain Asda has launched a new report called ‘Mumdex ‘ which surveyed 4,000 mums about their feelings on their finances, communities and the outlook for the future of their family.

And while — statistically — it is far from being as robust as government data, some findings make for difficult reading.

According to the poll, 23% of mums have to borrow money just to make ends meet and this rises to 43% of 16- to 29-year-olds, the category most affected by unemployment.

The new report coincides with a government project to get teenagers into jobs by paying companies who steer them into either training or employment. The latest unemployment figures showed almost 1.2 million 16- to 24-year-olds not in employment, education or training.

The proportion of mums who occasionally or often borrow to make ends meet highlights the squeeze on household incomes that have been steadily shrinking as the price of petrol, utilities and food has risen.

Three quarters of Mumdex respondents said they have less disposable income than last year, and 71% are upgrading big ticket items like TVs less frequently.

The results bear out a retail trend that has seen electrical retail sales falling steadily for several quarters, along with most other discretionary spending.

Asda said on Tuesday same-store sales in the 14 weeks to Jan. 7 rose 1%, a relatively strong performance in a very competitive grocery market.

It compares with Tesco’s fall from grace that saw it issue a profit warning after festive sales fell over 2%, while smaller rivals Wm Morrisons and J Sainsbury both also recorded positive sale growth. The different reporting periods makes direct comparison difficult, although Asda’s CEO Andy Clarke claimed the company “won Christmas.”

Asda’s ‘mums’ will be reporting back quarterly. It means the holders of the nation’s consumer purse strings will add another voice to the disquieting statistics which predict that consumers and retailers will remain under pressure for some time to come.

via Mum’s the Word for Asda – The Source – WSJ.

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Asda has signalled an end to the multi-buy offers that had become a staple of supermarket shopping, such as three products for the price of two, as it believes many Britons are too poor to buy in bulk.

Britain’s second biggest supermarket chain by market share – reiterating that it was a “clear winner” in the Christmas grocery battle – said shoppers were eschewing bulk buy deals in order to stick to strict budgets.

Judith McKenna, chief operating officer, said: “When you are working on a cash budget for the week, actually you can’t necessarily afford to buy a multi-pack of something when you have got to the end of the week. It may be better value, but you can’t afford it.”

Last January, it offered tinned tomatoes in a bulk buy at four tins for £2, and had sold 1m cans. This January it offered individual tins of tomatoes at 50p each and sold 1.3m.

Asda has been trying to bring down the number of special offers, concentrating instead on offering low prices across the board.

In the 14 weeks to January 7, Asda increased sales from stores open at least a year by 1 per cent, excluding fuel and VAT, helped by its pledge to be 10 per cent cheaper than rivals or refund the difference, and improvements in the quality of its food.

Walmart, Asda’s parent, said UK sales from stores open at least a year rose 0.1 per cent in the three months to December 31, excluding acquisitions and fuel. Asda attributed the difference to the inclusion of the first few days of the new year, when Britons returned to normal shopping habits after the end of the Christmas and new year holiday. Walmart said Asda increased operating income faster than sales.

The sales increase contrasts with a UK underlying like-for-like sales decline of 2.3 per cent at Tesco over the Christmas and new year period.

Andy Clarke, chief executive of Asda, said the group had been gaining market share and had been a “clear winner” at Christmas.

“That means someone is obviously losing. I am sure you can draw your conclusions [as to] who’s losing share, given some of the recent trading updates,” he said.

However, he shrugged off the prospect of a fight back from Tesco.

Tesco is expected to spend hundreds of millions of pounds revamping its stores and hiring staff, with a particular emphasis on fresh food, an area where Asda has been seeking to improve its position.

“We have got a very good plan and we will continue to exploit that,” Mr Clarke said.

via Asda signals end to bulk buy offers – FT.com.

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Andy Clarke, the chief executive of Asda, has become the latest grocery boss to signal the days of building huge out-of-town hypermarkets packed with non-food could be drawing to a close.

He made his comments yesterday as the Walmart-owned grocer posted a slowdown in its underlying sales growth over the Christmas quarter.

Mr Clarke said that “acquiring large space is ever more difficult”, not just as big stores are harder to find and acquire but also due to “planning constraints”.

Asda plans to open 25 stores this year, with a focus on stores sized between 3,000 square feet and 80,000 sq ft. The bulk of its 541 stores are about 40,000 sq ft.

Asda’s comments follow those of Tesco’s chief executive, Philip Clarke, who, alongside its first profits warning in 20 years last month, in effect put the brakes on it building big hypermarkets, as people increasingly shop online or baulk at driving to stores on the edge of towns.

Concerns have been raised about the grocery “space race” and lower returns on new shops. The big four UK grocers plan to grow space by 19m sq ft, or 21 per cent, between 2011 and 2015, with sales volumes set to rise by just 2.3 per cent.

An Asda spokesman said: “The requirement to have those big out-of-town stores is somewhat negated by the ability to order online and have it delivered to your local shop.”

He said the grocer had “no plans” to open any supercentres sized between 80,000 sq ft and 120,000 sq ft this year. But he said: “If the right location became available at the right price I’m sure we’d be interested.” Asda has 32 supercentres but the last one it opened was in Ellesmere Port in August 2006.

Mr Clarke said Asda was the “clear winner at Christmas”. It was boosted by a focus on lower prices, the 147 Netto stores it has converted, revamped own-label ranges and online sales up nearly 20 per cent in the quarter. Asda grew sales, excluding fuel and VAT, by 1 per cent in the 14 weeks to 7 January but by just 0.1 per cent in the final three months of 2011. This compared with growth of 1.3 per cent in the previous quarter.

Mr Clarke said: “In the autumn, customers were tempted by competitors’ promises on price,” interpreted to mean Tesco’s Big Price Drop, but they returned to Asda in November and December.

According to Kantar Worldpanel, Asda delivered sales up by 8.2 per cent for the 12 weeks to 22 January. This compares with a 5 per cent rise at Sainsbury’s, Morrisons’ 3.7 per cent growth and just 2.1 per cent at Tesco.

via Asda is cooling on hypermarkets as festive sales tick up – Business News – Business – The Independent.

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Asda, the British arm of U.S. retailer Wal-Mart Stores Inc, posted a slowdown in sales growth in its fiscal fourth quarter as shoppers cut back due to rising prices, muted wages growth and an uncertain economic outlook.

Chief Executive Andy Clarke said he was instinctively optimistic about prospects in 2012 but said it was too early to say if positive recent data on the UK economy represented a turning point or was merely a blip.

“Listening to customers they are still finding the prospects of the economy quite challenging,” he told reporters on Tuesday.

Britain’s second-biggest supermarket chain behind Tesco Plc said sales at stores open more than a year, excluding fuel and VAT sales tax, rose 1 percent in the 14 weeks to Jan. 7.

That followed a 1.3 percent increase in the third quarter, but compared favourably with many of its rivals, prompting CEO Clarke to tell reporters: “We were the clear winners at Christmas, we won Christmas.”

Asda said underlying sales rose just 0.1 percent in the last three months of 2011, followed by a surge in demand in the first week of January, when British shops traditionally offer unsold stock at cheaper prices.

Tesco reported a 2.3 percent drop in underlying UK sales for the six weeks to Jan. 7, while industry No.3 J Sainsbury posted a 1.2 percent increase for the 14 weeks to Jan. 7 and No.4 Wm Morrison a 0.7 percent rise for the six weeks to Jan. 1.

CUTTING BACK

Many Britons have been cutting back spending over the past year as price increases outpaced wage rises and higher unemployment weighed on confidence. The lack of consumption has been one of the main drags on economic growth.

However, on Friday official data showed British retail sales rose unexpectedly in January.

That data, a string of strong business surveys and some stabilisation in the labour market have raised hopes that Britain’s economy will avoid recession despite having contracted in the last three months of 2011.

Clarke said he expected trade to benefit from this summer from celebrations to mark the Queen’s Diamond Jubilee, the Euro 2012 soccer championships and the London Olympics.

“We would like to recognise that when we have events our customers shop with us because the extra personality that Asda offers brings people in,” he said.

The chain, which trades from around 540 stores, lagged Britain’s grocery market in 2010 but fought back in 2011, helped by its purchase of smaller format Netto stores and a re-launch of its own-brand food range.

It has also benefited from its “price guarantee” which offers to refund customers the difference, via a voucher, if an online price comparison website does not show their shopping was at least 10 percent cheaper than at a rival.

“After some difficulties last year, Asda now seems to be successfully straddling the quality-price equation and will, in our view, be one of the major beneficiaries from Tesco’s current difficulties,” said analysts at retail research agency Conlumino.

The firm said last month it would invest over 500 million pounds ($793 million) this year, opening 25 new stores and three depots and creating up to 5,000 jobs.

Separately Wal-Mart, the world’s biggest retailer, posted fourth quarter sales and profit that fell short of Wall Street expectations.

via UPDATE 2-Asda sales growth slows | Reuters.

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Wal-Mart has regained its footing by turning back the clock.

The Bentonville, Ark.-based retailer reported a 5.8% increase in net sales in the fourth quarter 2012 and a similar gain for the entire fiscal year ending Jan. 31.

Dick Spezzano, president of Monrovia, Calif.-based Spezzano Consulting Inc., said Wal-Mart has re-established itself as an “everyday low price” leader of national brands after dabbling with a private-label approach.

“Wal-Mart is known for national brands at the lowest possible price,” Spezzano said. “It wasn’t known for the lowest price on private labels,” he said.

Net sales for 2012 were $443.9 billion, up 5.9% over fiscal year 2011, according to a Feb. 21 news release from Wal-Mart. The chain reported comparable store sales were up 1.5% in the 13-week period ending Jan. 27, compared with a 1.8% decline for the same period last year.

Along with an improving economy, Spezzano said food inflation may have helped the chain boost sales.

“We are pleased with Wal-Mart’s earnings performance for both the fourth quarter and the full year,” Mike Duke, Wal-Mart Stores Inc. president and chief executive officer, said in the release. “Today, every segment of our business is stronger than it was a year ago, and we’re in a great position for fiscal year 2013.”

Duke said Wal-Mart has enjoyed two consecutive quarters of positive comparable stores sales. “Our price leadership is making a difference across the United States, as many families are settling into a new normal,” Duke said in the release.

Charles Holley, executive vice president and chief financial officer, said in the release that first quarter 2013 earnings per share could range from $1.01 to $1.06, up from 98 cents per share in the same quarter last year.

For the entire year, Wal-Mart’s earnings per share for fiscal year 2013 is projected between $4.72 and $4.92, which is up from the $4.54 per share reported for the fiscal year 2012.

After food prices rose about 4% last year, escalating gas prices could contribute to food inflation again in 2012, Spezzano said.

“More than likely, we are going to see food inflation in that 2% to 4% range,” Spezzano said.

via Wal-Mart sales bump comes on strength of national brand sales – The Packer.

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Wal-Mart Stores Inc’s price cuts hurt its fourth-quarter profit and it plans to trim prices further in the coming months, a move that is expected to keep shrinking margins.

The company’s shares, up more than 29 percent since August, fell 4.2 percent in early trading, erasing the gains seen so far in 2012.

Wal-Mart’s quarterly profit and sales fell short of Wall Street expectations. While price cuts in the U.S. helped bring in more customers during the crucial holiday season, those customers did not spend as much as investors had hoped.

Walmart U.S., the company’s biggest division, has been lowering prices and bringing back a wider variety of items to woo shoppers on limited budgets who started to shop at dollar stores and elsewhere.

Traffic at those stores rose after six quarterly declines, showing that such efforts, as well as bringing back a holiday layaway plan, brought in shoppers.

“The market wanted Wal-Mart to begin to transition to a land of stronger profits per sales in the fourth quarter and then project that trend becoming more self-sustaining” this year, said Brian Sozzi, chief equities analyst at NBG Productions. “On both scores, there was disappointment to be found.”

Walmart U.S. posted a 1.5 percent increase in sales at stores open at least a year. It was the second quarter in a row that Walmart U.S. same-store sales rose after nine consecutive quarterly declines.

Analysts on average had expected a rise of 1.8 percent, according to Thomson Reuters data. Wal-Mart expected Walmart U.S. same-store sales would be flat to up 2 percent, compared with a 1.8 percent drop a year earlier.

Operating income growth at Walmart U.S. grew at a slower rate than sales. Gross profit margin declined 13 percentage points at Walmart U.S. and 33 percentage points overall as the company cut costs and pushed those savings into lowering prices.

Shares of Wal-Mart were down $2.62 or 4.2 percent, at $59.85 after slipping to $59.68.

EXPECT MARGIN DECLINE

Wal-Mart is optimistic that employment reports will continue to improve, which could boost consumer confidence. But higher gas prices are pressuring shoppers’ limited budgets.

“There is a new normal with customers,” Chief Financial Officer Charles Holley told reporters. “Markets are more volatile, gas prices are more volatile and so I think the customer is going to continue to look for ways to save money because they don’t know what’s around the corner.”

He warned that investors should expect margins to decline as the company looks for new ways to trim costs and cut prices.

Wal-Mart earned $5.19 billion, or $1.51 per share from continuing operations attributable to the company, up from $5.02 billion, or $1.41 per share, a year earlier.

Excluding about 7 cents per share from certain tax matters and real estate transactions, Wal-Mart earned $1.44 per share. The company had forecast a profit of $1.42 to $1.48 per share, which did not include the benefits.

Analysts, on average, expected it to earn $1.45 per share, according to Thomson Reuters I/B/E/S.

Sales rose 5.8 percent to $122.29 billion, below the average analyst estimate of $124.21 billion.

Same-store sales rose in all Walmart U.S. categories except for apparel. A mild winter has crimped demand across the industry for items such as coats and sweaters.

Wal-Mart forecast first-quarter earnings per share from continuing operations attributable to the company of $1.01 to $1.06, compared with a profit of 98 cents per share a year earlier, which included a lift of 1 cent from multiple items. Analysts on average forecast $1.05 a share.

The company expects Walmart U.S. same-store sales to be flat to up 2 percent in the first quarter.

It forecast fiscal year earnings per share from continuing operations attributable to the company of $4.72 to $4.92. In fiscal 2012 it earned $4.54 per share including 5 cents of benefits.

Wal-Mart’s international business grew at a faster clip than the larger Walmart U.S. Operating income at Walmart International rose 15.2 percent to nearly $2.31 billion, while Walmart U.S. operating income rose 1.4 percent to $6.11 billion.

International results were mixed. Britain’s Asda saw sales growth slow from the third quarter. Wal-Mart de Mexico, or Walmex, topped analysts’ expectations as it opened more stores.

On Monday, Wal-Mart said it was taking a controlling stake in Chinese e-commerce company Yihaodian to expand its international reach.

via Wal-Mart holiday price cuts hit profits | Reuters.

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Wal-Mart Stores Inc. (WMT), the world’s largest retailer, reported fourth-quarter profit that trailed analysts’ estimates as an emphasis on low prices hurt margins.

Net income for the quarter ended Jan. 31 fell 15 percent to $5.16 billion, or $1.50 a share, from $6.06 billion, or $1.70, a year earlier, the Bentonville, Arkansas-based retailer said today in a statement. Excluding some items, profit was $1.44, trailing the $1.45 average estimate of 24 analysts surveyed by Bloomberg.

Chief Executive Officer Mike Duke is working to contain Wal-Mart’s costs and last quarter started pulling the company’s greeters from store lobbies to help with customer-service tasks. The retailer is seeking to keep prices low as its low-income shoppers suffer from persistent unemployment.

“It’s not the most inspiring result, but they’re in a better place than they were 12 months ago,” Natalie Berg, global research director for Planet Retail in London, said in an interview. “Going back to basics is a winning strategy, but it will take some time.”

Sales at U.S. Wal-Mart stores open at least a year rose 1.5 percent, the second gain in the past 10 quarters. The average estimate of six analysts was for a 1.8 percent gain.

Total revenue increased 5.9 percent to $123.2 billion. Gross profit as a portion of sales narrowed to 24.3 percent, a 0.4 percentage point decrease from a year earlier.

Wal-Mart fell 2.9 percent to $60.69 at 8:23 a.m. in New York. The shares gained 11 percent last year.

Sam’s Club Sales

Comparable-store sales including fuel for the Sam’s Club warehouse membership unit rose 6.8 percent, topping analysts’ average estimate of 5.5 percent. The company said last month that Brian Cornell would step down as the unit’s CEO and be replaced by Rosalind Brewer, who most recently was president of Wal-Mart’s U.S. East business.

Sales at the company’s international operations rose 13 percent to $35.5 billion. Operating income for the unit increased 15 percent to $2.31 billion.

Wal-Mart said yesterday it increased its holding in closely held online supermarket Yihaodian to tap rising consumer wealth in China. The company, now 51 percent owned by Wal-Mart, will use the funds to expand its offerings and open more warehouses and delivery stations.

via Wal-Mart Profit Trails Estimates – Bloomberg.

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