MASSWAREHOUSE DIVISIONAL REVIEW
WAREHOUSE CLUB

MASSWAREHOUSE
STORE PROGRESS

OPENING BALANCE
   

MAKRO

 
STORES OPENED 
BLOEMFONTEIN
CAPE GATE
 
   
TOTAL STORES
DECEMBER 2012
   
Trading space m2 179,202
DC space m2 51,300

 

Financial performance

Sales
R9,630.2 million

Trading profit before tax
R535.1 million


Investing in our environment


Investing in our human resources


Investing in our community

The SUCCEED (Supporting Caregivers and Centres in Early Childhood Development) Project as a collaboration between Makro and Hope Worldwide, and has as its objective the building of a capacity of ECD Centres that serve vulnerable children, so that the children in their care receive the stimulation, education, protection, development and nutrition to fulfill their potential.

HIGHLIGHTS

  • Sales growth of 23.5%
  • Trading profit before tax increased by 12.7%

KEY SALES DRIVERS

  • Product deflation
  • Price perception
  • Interest rates
  • Consumer confidence and disposable income
  • New stores

  • Now 18 stores
  • Operating in SA
  • Food, Liquor, General merchandise
  • LSM 6-10 and Food LSM 2-6

The Makro brand

The Makro model is unusual in that it sells General Merchandise to retail customers while much of its Food and Liquor is sold to wholesale customers. This blend gives the brand a robustness that enables it to trade comfortably through most economic cycles. The big-box warehouse club format with our no-frills approach keeps costs down and provides the platform for our high- volume, low-margin sales offering of quality branded merchandise. Our customer database of Makro store cards used at the point of purchase helps us to keep track of the spending patterns of our 2.1 million active members and we communicate regularly with them through targeted promotional material.

Makro’s offerings are tailor-made to fit a variety of customer needs across all our merchandising categories.

Our food offering caters to wholesale shoppers ranging from informal traders and grocery store owners to hoteliers, restaurateurs, offices and schools. Wholesalers account for up to 80% of Makro’s food sales and most shop during the week for the convenience of our wide range of good-value, quality consumables. At weekends, our focus shifts to promoting good buys for retail food and grocery shoppers who can achieve substantial savings on their monthly household basket compared with other mass retail outlets.

Our liquor offering also caters to both the retail and wholesale customer. Makro’s liquor outlets, immediately adjacent to our main outlets, continue to increase their range of premium brands especially in wine and whisky. These products are sold at a low margin to maintain and grow our share of the market. At the same time we have maintained a strong presence of beer and budget brands for liquor wholesalers looking for good value.

Future outlook

We plan to open two Makro stores per year until 2015, giving us a footprint of 23 stores in South Africa.

Initiatives for the year ahead include rolling out our Food Retail offering and new butchery design across all Makro stores. We also plan to complete the integration of Fruitspot and drive growth and cross-selling opportunities across the business.

Our e-commerce plan is expected to be finalised shortly and we aim to create an online retail store by mid-2013. This will also enable us to enhance the use of social media and digital direct marketing vehicles to drive footfall into both our online and bricks and mortar stores, as well as better align our product marketing to consumer needs. We plan to implement a mobile solution to facilitate sales, team operations as well as improve customer service to resale traders.

The integration of Masswarehouse into the Walmart family has been positive, with the projects related to culture, governance and value completed. The resultant positive impacts include leverage through the global organisations resources, processes and merchandise availability; culture alignment as well as enhanced cooperation with other divisions in the Massmart Group. We will continue to work closely with the integration team to leverage further synergies.

In the year ahead, Masswarehouse will continue to build momentum and maximise operating income, exploring new business areas, new categories of customer and optimising the returns on the trading space in our stores.

 

READ MORE
More information on the divisional financial
performance can be found in:

LETTER TO STAKEHOLDERS
FINANCIAL DIRECTOR’S REVIEW

DEFINITION
TRADING SPACE (M2)

Trading space excludes parking, yard, warehouse space, office space and receiving areas.

 

  Grant Pattison Chairman, Doug Jones Divisional Managing Director, Bruce Cayzer Food Director, Guy Hayward Non-executive Director, Garry Hendry Liquor Director, Derick Kalan General Merchandise Director, Gert Lourens Operations Director, Chris Nezar Marketing Director, Pieter Schoeman IT Director, Mike Spivey Non-executive Director, Llewellyn Steeneveldt Non-executive Director, Julie Wilford Financial Director, Donovan Wright HR Director, Ilan Zwarenstein Non-executive Director