Whitey Basson 'just wrong' about Walmart
CEO of Walmart-owned Massmart says Shoprite’s Whitey Basson is wrong about their presence in Africa.
JOHANNESBURG - Massmart CEO Grant Pattison says it's too early to ask whether the company's relationship with Walmart has been beneficial and that compared to the western operations of the US company, Massmart is "way behind."
Massmart is 51 percent-owned by the world's biggest retailer, Walmart.
Pattison spoke to 567 CapeTalk/Talk Radio 702's Bruce Whitfield on Thursday night following news that his company has posted a 10 percent fall in first-half profit, hurt by a weak market and slow expansion into other African countries.
Given South Africa's dismal growth prospects, investors are keen to see evidence of retailers expanding into fast-rising sub-Saharan economies.
But Massmart has been slow to deliver, losing ground to domestic rival Shoprite which on Wednesday laid out an ambitious plan to open 47 stores outside of South Africa.
Shares in Massmart, which are down about 20 percent this year, dropped further throughout the day, reaching nearly 3 percent less by 4pm.
Questions have been raised about Walmart's presence in Africa, while the impact it might be having on Massmart itself is not clear, but Pattison says it's too early to speculate about this.
"It would be wrong at this point to say Walmart has either helped or not helped Massmart. I think maybe from next year it would be fair to start saying, 'is the performance somehow related to Walmart?'"
He also admitted that Massmart has a lot of catching up to do with its American owners and their counterparts in other major western countries.
"One of the things that I've discovered personally is just how far companies like ASDA [Walmart's UK unit], Walmart USA and Walmart Canada are ahead of us. I would have said we're a world class retailer, but sitting around the table with those companies I've realised we're way behind."
Meanwhile, at a presentation earlier in the day, Pattison said, "We want to slightly shift our focus away from South Africa and put more resources into African growth."
The company said all but 10 to 15 stores to be opened over the next three years would be in South Africa.
Analysts said Massmart's expansion could be quicker if key markets such as Nigeria had modern shopping infrastructure for its flagship Game stores.
"If Massmart considers smaller, standalone stores they would probably expand faster," said Patrick Ntshalintshali, a portfolio manager at Vunani Fund Managers.
Massmart runs 29 stores in 11 African countries outside South Africa which contribute about 8 percent to its total sales.
Shoprite, by contrast, runs 153 supermarkets and could double that number in three to four years, CEO Whitey Basson earlier said this week.
On Tuesday, Basson, also speaking to Whitfield, criticised Walmart's apparent lack of presence on the continent so far.
Referring to his own presence in other African countries Basson said, "I don't see them in the same hotels or being bitten by the same mosquitoes as I do when I'm in those places."
He added, "I just read that they're conquering Africa, I'm not seeing much of that at this point of time. It's the flavour of the month."
But Pattison shot back on Thursday, saying of Basson, "First of all, he's just wrong."
He explained that he's spent a lot of time in west and east Africa, where Basson claims never to see him.
"I suspect he doesn't see us because I fly commercial and stay in cheap hotels. We spend a lot of time in Africa and we're making good progress on our plans."
He revealed that on top of the growing number of markets already open in Africa, food retail stores would soon be opened in west Africa.
"If it works, we'll immediately move that format to east Africa."
Massmart could also boost presence on the continent with acquisitions but, at the conference earlier in the day, Pattison said there were few retailers that would fit into its stable.
He declined to comment on news that Massmart is looking to take a controlling stake in Kenyan supermarket chain Naivas, a deal which could double its foreign outlets.
Massmart, which sells everything from groceries to televisions, said headline earnings per share fell 9.9 percent to 181 cents in the first six months of the year.
However, sales increased 8.9 percent to R32.4 billion and the company maintained its dividend payout at 146 cents per share.
"There's little on the macro-economic horizon that suggests any improvement," said Massmart. "We believe the remainder of the year will continue to see sales under pressure."
*Additional reporting by Reuters