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What Walmart veteran Mitchell Slape means for Massmart

| On the move

The appointment of a Walmart veteran as the new CEO of Massmart could signal the US giant is going to become more involved in the day-to-day operations as it looks to turn around the struggling retailer.

Mitchell Slape, CEO of Walmart Japan, joins Massmart — which is 52% owned by the world’s largest retailer — at a time when it is losing market share to rivals such as e-commerce site Takealot.

The announcement of Slape’s appointment came on the day Massmart warned earnings for the six months to June could more than halve, sending shares tumbling more than 12%, the biggest one-day drop since January 21.

Argon equity analyst Bjorn Samuels thought it was unlikely that Slape’s appointment was a sign that Walmart planned to increase its stake in Massmart, but did think "this could give them more operational control".

Massmart, overall, had arguably been a disappointing investment for Walmart, he said.

"Massmart’s share price [of R68] is down significantly since Walmart took its initial stake in 2011, and is down more than 65%, since the R205 per share peak in 2013."

He said he did not believe Walmart would look to increase its holding in Massmart given the fall in valuation.

But Gryphon research analyst portfolio manager Casparus Treurnicht thought there was a possibility of Walmart taking full control of Massmart.

He saw the sharp drop in its valuation as an opportunity to take control on the cheap. "I think it might be a good possibility at this point in time. A buyout is an easier route. Why not?"

Treurnicht saw the appointment of Slapes as a possible first step. "Sending in an ex-Walmart as its new CEO would be a good way to complete due diligence and identify how easy it can be bought out without drama."

"Mitchell is a career retailer and has been with Walmart since 1995," Massmart said.

Slape’s prior roles include COO of Walmart’s business in Japan and senior vice-president of international business development at Walmart International. "Mitchell’s well-established Walmart network and extensive retail experience uniquely position him to leverage the relevant resources needed to elevate Massmart’s operating performance," Massmart said.

But even if the US retailer opted to take full control, it would not be easy. "For Walmart to delist the group they would first need to convince authorities and face resistance from minorities," Treurnicht said.

Thursday’s warning of an expected fall in earnings came after CEO Guy Hayward signalled at its last results presentation that Massmart’s operations would stabilise, said independent analyst, Chris Gilmour. "This is something quite ugly. Something major has gone wrong." He said it appeared Massmart had been unable to push through price hikes because durable goods were getting cheaper and consumers were more hesitant to buy them.

"Most of the challenges in these businesses stem from the deflation in commoditised products and increased competition," Samuels said.

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