Building materials retailer Cashbuild has warned that an influx of inferior products is disrupting the market and threatening consumer safety as they turn to cheaper options amid cash constraints.
CEO Werner de Jager said the surge in low-grade goods is one of the biggest risks facing the company in the year ahead. He told Business Day the group was spending more on customer education in stores to warn buyers about the risks of low-grade products, adding that Cashbuild would not compromise on quality, even as these cheap alternatives threaten its market share.
“We’re not going to sell them, but we must make sure our strategy is in place so we bring materials of the right quality to the communities and educate them about buying inferior products and their longevity,” he said.
This comes after Cashbuild reported a 5% increase in sales for the year to end-June with revenue up 3% to R11.5bn. The group said transactions rose 4% but customers were spending less per trip.
“We can see our basket sizes shrunk slightly. It’s also an indication people are not buying as much as in the past. We’ve seen more of them coming in, but it’s smaller amounts at a time. So, it does indicate that the community is under pressure.”
In its results on Wednesday, Cashbuild confirmed a retreat from its P&L Hardware brand. Several stores have been closed or converted to Cashbuild outlets, with the brand expected to shrink to only 10-15 stores in the long run.
The retailer said it was now leaning on its small model store (SMS) format for growth. Six out of eight new outlets opened in the year under review used the alternative format, taking the total to 29. The smaller, more flexible layout allows the company to expand into buildings not suited for its traditional box model, it said.
While Cashbuild ended the year with R1.9bn in cash and short-term funds, De Jager said more than half of it belonged to customers in prepaid deposits. Despite this, he said expansion and refurbishments remained a priority. He said acquisitions were also still on the table as the group continued to defend market share.
Headline earnings per share rose 10% to R10.40, while basic earnings per share jumped more than 100% due to the absence of last year’s impairment. The board declared a final dividend of 300c per share, up 27% from 2024.
The group, valued at about R3.5bn on the JSE, supplies its largely cash-paying customer base through more than 300 stores with building materials and related products.
Transactions through the tills increased by 4%, with selling price inflation at 1.7% by end-June.
During the year, the group opened eight new stores (seven Cashbuild and one P&L Hardware) and closed 12 (one Cashbuild and 11 P&L Hardware) underperforming stores. It refurbished 26 Cashbuild stores and relocated one P&L Hardware store.
The group said it planned to continue its store expansion, relocation and refurbishment strategy in a controlled manner, through its feasibility process.
For the seven weeks subsequent to its year-end, revenue is 6% higher than the previous year. However, management expects trading conditions to remain challenging.
In April, Cashbuild announced plans to acquire 60% of Allbuildco Holdings for R93m as part of the group’s strategy to serve a broader customer base across all income levels in SA.
The company aimed to use its scale and expertise to grow the Allbuildco business, it said.
Cashbuild expects Allbuildco to provide it with a growth platform to target a customer base it has not previously served.
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