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Massmart reports marginal uptick in total sales to R22bn

| Retailer trading results

Massmart, owned by US multinational retail giant Walmart, yesterday reported total sales of R22billion for the 13 weeks to end March, representing a marginal 1.3 percent year-on-year increase as the subdued economy continues to take its toll on hard-pressed consumers.

Massmart, whose retail outlets include Game, Builders Warehouse and Makro, said total sales from South African stores for the 13-week period had jumped by 1percent over the prior year, while comparable sales increased by 0.6percent over the same period.

Lulama Qongqo, a retail analyst at Mergence Investment Managers, said the 1.3percent increase in total sales was consistent with the tough economic environment for consumers prior to Covid-19, in which discretionary spending was largely under pressure resulting in the company closing unprofitable stores.

“They were already facing headwinds before the lockdown. I think what made matters difficult for them though is that they have significant exposure to discretionary categories that consumers were not shopping in, due to panic buying leading up to lockdown,” Qongqo said.

In a letter to shareholders in the company’s 2019 annual report released yesterday, Massmart chairperson Kuseni Dlamini described 2019 as one of the most difficult in the company’s history, culminating in its first loss of R861million since it listed on the JSE 20 years ago.

Dlamini said the challenging operating environment contributed to the poor performance, with hard-pressed consumers impacted by slow wage growth and rising fuel costs, opting to spend on non-durable goods rather than durable goods.

“This, together with the impact of load shedding and service protests, severely impacted our sales performance which totalled R93.7bn in 2019, compared to R90.9bn in 2018,” Dlamini said, adding that this amounted to a growth in sales of just 3percent. He said the outlook for the South African economy remained lacklustre and was further exacerbated by the global coronavirus pandemic.

Dlamini said despite the ongoing negative outlook for the South African economy, Massmart remained committed to building the strongest diversified retail group with the best long-term prospects on the continent.

“The board is confident that with a clear turnaround plan in place, driven by an experienced leadership team, Massmart’s prospects will improve,” said Dlamini. In an effort to turn the tide, the group last year had appointed seasoned retail veteran Mitchell Slape, 52, as its chief executive.

Slape hit the ground running by announcing a turnaround plan in January, which included exiting underperforming fresh and frozen food categories at Game, as well as the consolidation of the group’s low-cost wholesale route to market by merging Masswarehouse and Masscash Cash & Carry operations. Slape closed 34 underperforming DionWired and Masscash stores, affecting 1440 jobs.

Massmart’s share price closed 8.67percent lower at R27.40 on the JSE yesterday.

BUSINESS REPORT 

 

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