South African retailer Massmart has booked an increase in annual profits on the back of improved sales.

The company, in which Wal-Mart Stores owns a majority stake, yesterday (22 August) filed an 8.9% increase in underlying headline earnings per share. Net profit was up 39.9% at ZAR1.17bn.

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Operating profit, excluding costs related to Wal-Mart’s acquisition of shares in the business, increased 3.7% to ZAR2.14bn.

Total sales were up 15.6% at ZAR61.21bn. Comparable-store sales increased 9.6%.

“The results reflect the group’s continued investment for growth across all divisions, but specifically for food retail. This has driven sales and market share growth, while suppressing margin growth in the short term,” Massmart CEO Grant Pattison said.

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The retailer is changing its financial calendar and its next full reporting period will be the 26 weeks to December.  

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Sales and gross margins are “expected to perform well”, although “cost pressures” as a result of its investment remain, Massmart said. It expects “no net margin growth” for the 26 weeks to December or for the subsequent year to December 2013.

“Where value is extracted from integration, Massmart will invest much of it in price,” the company added. 

Pattison said: “The capital investments, our broad and growing relationship with Walmart, and our renewed focus on operating the business and delivering the strategy, positions us well for both growth in sales and trading margin in the medium to long term.”