Massmart’s annual losses widen knocked by Covid-19 and the July unrest

Massmart, the owner of Makro, Builders Warehouse and Game stores, was yesterday again on the backfoot with ballooning losses as it said its performance for the past year was severely hit by Covid-19 lockdowns and the July civil unrest. Photo: AP Photo/Denis Farrell

Massmart, the owner of Makro, Builders Warehouse and Game stores, was yesterday again on the backfoot with ballooning losses as it said its performance for the past year was severely hit by Covid-19 lockdowns and the July civil unrest. Photo: AP Photo/Denis Farrell

Published Mar 8, 2022

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MASSMART, the owner of Makro, Builders Warehouse and Game stores, was yesterday again on the backfoot with ballooning losses as it said its performance for the past year was severely hit by Covid-19 lockdowns and the July civil unrest.

In its results for the 52-weeks ending in December 2021, the retailer reported a 65 percent decline in headline earnings per share to a loss of 705.5 cents per share, with a loss for the year of R2.2 billion, from R1.75 billion before.

Massmart’s shares tanked 7.09 percent to R44.92 yesterday, with the share down 46 percent in three years.

Massmart chief executive Mitch Slape said the group's sales performance had been challenged by external events that had significantly impacted the company's high contribution General Merchandise and Liquor categories.

“It has not, however, derailed our turnaround momentum, the positive impact of which is becoming evident in our continuing operations performance,” he said.

Massmart said that total group sales of R84.9 billion represented a 1.9 percent drop compared to the same period in 2020, while comparable-store sales grew by 1.7 percent over the same period. The group again did not declare a dividend.

The retailer said it had lost about 110 days of trade due to the liquor sales bans in 2021, resulting in an R1.8bn impact.

During the civil unrest that took place in KwaZulu-Natal and Gauteng in 2021, 43 of its stores and two distribution centres were affected, resulting in lost sales of R2.7bn. Of that number, nine stores and both distribution centres were still closed. The unrest resulted in the group writing off inventory and impairing assets worth R1.4bn.

Massmart lost R4.5bn in sales because of the civil unrest and the Covid-19 prohibition on liquor sales.

“We estimate the combined lost sales margin associated with these events to be R666.1 million,” it said.

The retailer said it was focused on re-opening the remainder of those stores damaged during the civil unrest.

“At the same time, we expect our improved expense control from sustainable cost-saving initiatives to continue at pace,” the company said.

Massmart said Black November and festive season trading were also impacted by stock availability, resulting from the destruction of two distribution centres (DCs) during the July unrest, including its primary import processing centre, and from supplier stock-outs arising from the unrest in the electronic goods and home appliances supply chain.”

Its total sales for the year from continuing operations increased by 0.1 percent to R77.6bn.

The retailer said turnaround initiatives to simplify and focus the business were mostly complete, these included strengthening Game and Builders warehouse.

Game reported a trading loss before interest and taxation of R1.03bn, from a prior loss of R532.5 million, while Builders reported a trading profit of R1.18bn.

While the company has not been performing well, looking ahead Massmart said in the next five years it planned to expand and increase Builder's store footprint, which it hoped would generate potential sales of R2.4 bn from R1.4bn before.

“Makro will see a 25 percent increase in its store network, growing potential sales by R2bn to R7bn. Existing stores in both formats will also benefit from focused store remodelling programmes,” the group said.

dieketseng.maleke@inl.co.za

BUSINESS REPORT ONLINE