Massmart says civil unrest cost the company R2.5 billion in stock damage, property replacement
Massmart said it would pay R650 million out of its own pocket after the looting in KwaZulu-Natal and parts of Gauteng in July was not fully recovered from its insurance cover.
Dineo Faku | IOL
Massmart, owners of Game, Makro and Builders Warehouse, estimated that the total replacement cost for property and stock damages as a result of the civil unrest to be R2.5 billion, of which R1.3bn relates to inventory losses.
The group said this material impact was mainly due to two Makro stores, in Pietermaritzburg and Springfield, and two distribution centres (DC) in KZN, Riverhorse and Cato Ridge, being looted and severely damaged.
The Makro store in Pietermaritzburg and the Riverhorse DC were completely destroyed by arson.
“The group does have South African Special Risk Insurance Association (Sasria) insurance cover for the fixed asset and stock losses suffered. However, as previously communicated, the Sasria cover is not sufficient to cover the full extent of the losses. The expected net loss for the group after taking the insurance cover into account is estimated at R650m,” said Massmart.
The group received an interim insurance payment of R500m in September 2021. It said the assessment of the business interruption (BI) losses was ongoing.
“The group is comfortable it is adequately covered for the full extent of the BI losses through a non-Sasria policy.” An interim payment for BI losses was imminent, it added.
The group said the business was well prepared for the upcoming Black Friday and festive trading periods.
“In the case of Black Friday we have, on the strength of customer feedback, extended the promotion to cover the full month of November across our Makro, Game and Builders trading banners, all of which, as part of our new ways of working, have collaborated closely to leverage group wide scale to negotiate deals that will deliver exceptional customer value whilst preserving margins,” said the group.
Massmart said its total sales for the 39-week period ended September 26, 2021, increased by a marginal 0.2 percent during the 39 weeks ended September to R60.6bn, with comparable store sales increasing by 2.9 percent over the same period.
Sales from continuing operations for the 39-week period amounted to R55.5bn and represented an increase of 2.5 percent over the prior year, with comparable stores sales increasing by 4.5 percent with both Makro and Builders posting strong growth, while Game continued to struggle.
Makro’s total sales jumped by 10.8 percent to R19.9bn compared to a year earlier, while comparable stores sales increased by 13.1 percent.
Makro’s alcohol sales for the nine-month period soared by 48.1 percent, with general merchandise sales increasing by 9.5 percent.
The group said Builders continued to enjoy a strong sales performance, with total sales of R10.9bn, being 11.8 percent higher than last year, driven mainly by strong retail demand. Sales from comparable stores increased by 10.8 percent.
At Game, total sales were 8.2 percent lower than a year ago at R10.9bn.