Wal-Mart`s Massmart Profit Drops 26%

Massmart Holdings Ltd., the South African food and goods wholesaler controlled by Wal-Mart Stores Inc., said first-half profit fell 26 percent as price competition curbed margins and other African currencies weakened against the rand.

Profit excluding one-time items fell to 269.3 million rand from 364 million rand a year earlier, the Johannesburg-based company said in a statement on Thursday. That compared with a 26 percent decline a year earlier. Sales rose 9.1 percent to 39 billion rand.

South African unemployment of 25 percent, power cuts and rising fuel prices are putting pressure on shoppers to cut down on major purchases. South African consumer confidence dropped to a 14-year low in the second quarter of this year. Massmart faces strong competition throughout its business, it said.

“All participants — suppliers, service providers, retailers and wholesalers — are competing keenly for profitability and market share, causing heightened margin pressure across the retail value chain,” Massmart said.

The company made a net foreign exchange loss of 106.7 million rand, “mostly as a result of the weakening of the average basket of African currencies against the rand,” it said. The weakening of the local currency against the U.S. dollar exacerbated the loss.

The shares have decreased 19 percent this year, the biggest decliner on the FTSE/JSE Africa General Retailers Index.