Cashbuild hit by tough trading conditions
Building materials retailer Cashbuild reported increased sales for the year to June, but the results highlighted the pressure facing consumers as weak household finances continue to weigh on home improvement spending.
The group said trading conditions remained difficult throughout the year, adding that while sales grew and customer numbers improved, shoppers remained cautious.
Group revenue for the year to June increased by 5.5% to R12.1bn from R11.5bn supported by 1.5% selling price inflation and new store growth. Headline earnings per share were down 7.7% from 1,040 cents last year to 960c, dragged down by losses outside South Africa, most notably the disposal of its Malawi operations. The exit resulted in a loss of about R35m and contributed to a significant decline in reported earnings for the year.
Cashbuild, which operates more than 300 stores across Southern Africa and caters primarily to cash-paying customers, said the DIY market remained constrained during the financial year. The retailer’s performance showed signs of resilience, helped in part by its acquisition of hardware chain Amper Alles in December.
Luresha Chetty, senior equity analyst at Ashburton Investments, said the results reflected the mounting pressure on consumers’ wallets, with spending remaining under strain as households contend with rising living costs.
“Both the average basket size and customer transaction volumes increased in the period, however the materiality of the increase reflected that consumers continue to be cautious in their spending. Selling price inflation, while still below CPI, has been sticky,” she said.
Chetty noted that while demand for DIY products remains weak, management has been taking steps to reposition the business for future growth. These include streamlining its operations outside South Africa and focusing on areas where returns are stronger.
Cashbuild has been reducing its exposure to underperforming operations elsewhere on the continent. The company sold its two stores in Malawi during the year, citing challenges linked to the local currency and profitability.
Of the remaining 27 rest of Africa stores, only Botswana operations remain outside the rand common monetary area, said Chetty.
The retailer has also closed underperforming outlets within its P&L Hardware business while others were converted into smaller-format Cashbuild stores, which management believes offer stronger profitability.
At the same time, the company has been experimenting with new store formats, brands and product categories to capture a greater share of DIY spending and expand into areas where demand is stronger.
“Over the past 18 months or so, we have seen new formats, brands and lines acquired or launched, to capture more of the market’s DIY spend and regrow the store footprint into locations and categories of higher demand,” said Chetty.
Cashbuild remains cautiously optimistic about 2027, despite a challenging consumer environment. Consumer spending is expected to remain constrained by high unemployment and rising living costs.
The retailer said sales in the weeks following year-end were broadly unchanged from the comparable period a year earlier, suggesting the recovery in discretionary spending remains elusive.
CEO Werner de Jager said: “Cashbuild will continue to expand and invest in its store footprint, and remain focused on affordability, accessibility and relevance. We will continue to provide value-driven DIY and building material solutions that enable customers to maintain and improve their homes, supported by disciplined cost management, operational efficiency and strong in-store execution.”
Chetty said the difficult times underway for the Cashbuild customer “appear unlikely to change in the short-term given the high energy prices and threats of El Nino driven food inflation consuming disposable income. It is tough to see the demand for DIY improving in the near-term however we have seen some pivoting from the management team, which we feel better positions the group for future growth.”