adminpursuit of a bigger market share.
Wal-Mart took a 51 percent stake in Massmart in June this year in a US$2,4 billion deal, giving it a substantial presence in Africa.
The world’s biggest retailer is now expanding Massmart’s grocery chain, a move that pits the Arkansas-based retailer against South Africa’s dominant food retailers such as Shoprite , Pick n Pay and Spar .
“There’s no sustainable, strategic business model that is just going to run on low gross margin but what is certainly true is, as we open new stores we will sacrifice margins to attract new customers,” Massmart’s chief executive officer Grant Pattison said in a results conference call yesterday.
Massmart, which suffered a 25 percent drop in full-year profit, achieved a gross profit margin of 18,3 percent in the year to end-June, slightly higher than 18 percent a year earlier as weak prices in its smaller grocery unit weigh.
South African retailers are also gearing up to take on Wal-Mart. Shoprite said this week it would spend three billion rand (US$415 million) to expand and upgrade its supply chains and open 74 new stores. – Reuters.
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