Massmart has flagged a R6 billion loss in sales as Covid-19 restrictions on alcohol sales hits its performance during the 52 weeks ended on December 27. Picture: Motshwari Mofokeng/African News Agency (ANA)
Massmart has flagged a R6 billion loss in sales as Covid-19 restrictions on alcohol sales hits its performance during the 52 weeks ended on December 27. Picture: Motshwari Mofokeng/African News Agency (ANA)

Covid-19 restrictions hits Massmart sales

By Dineo Faku Time of article published Feb 22, 2021

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JOHANNEBSURG - MASSMART has flagged a R6 billion loss in sales as Covid-19 restrictions on alcohol sales hits its performance during the 52 weeks ended on December 27.

The group said on Friday that the performance had forced it to carefully review its strategy and to divest in an additional 14 Masscash Cash and Carry stores.

The owner of Game, Makro, and Builders Warehouse said estimated losses as a result of Covid-19 amounted to at least R6bn, including extended restrictions on normal trading of alcohol when compared to 2019.

“Some of the impact of lost sales were offset by rent relief received from our landlords, and benefits received from government through the Temporary Employment Relief Scheme relief provided,” said Massmart.

The group’s total sales were R86.6bn, 7.7 percent lower than a year ago as Covid-19 restrictions weighed heavily on foot traffic.

Massmart, which received a R4bn intercompany loan from parent company Walmart last year to increase and to address liquidity constraints, said trading profit would be between 3 and 8 percent better than the 2019 trading profit of R1.1bn.

“The combination of the improvement in gross margin and strong expense management assisted to offset the impact of lost sales relating to Covid-19 restrictions,” Massmart said.

However, fourth quarter sales contracted 4.1 percent, impacted by softer sales over the Black Friday period and lower foot traffic in regional malls.

“The company’s extension of Black Friday promotions throughout the month of November mitigated some of this impact, with total sales for November being 5 percent lower than the previous year,” Massmart said.

The retail sector was negatively affected by a weak Black Friday, with BankServAfrica reporting that store card transactions had declined 32.6 percent in volume and 51.5 percent in value.

BankServAfrica said the Covid-19 compliance requirements, which constrained store capacity, were a leading contributor to this decrease.

Massmart said the home improvement segment, however, grew 8.1 percent in the second half.

The group incurred total retrenchment costs of approximately R132 million for the full year following the closure of Dion Wired, and the 11 Masscash stores, the shake-up of Game’s operating model, and the reorganisation of certain support functions into centralised centres of excellence.

Massmart said that it was divesting in an additional Masscash stores following a more comprehensive strategic review of the business.

“This decision is aligned to our previously referenced turnaround objective to optimise the group store portfolio and is enabled by the good progress that we have made toward consolidating our Makro and Masscash

wholesale store base within the Massmart Wholesale Business Unit,” said the group.

Last year Massmart closed its entire Dion Wired business, 11 Masscash stores, and shook up the business model at Game stores by shelving fresh produce and introducing basic apparel.

The Competition Tribunal last week approved the transaction covering eight out of the 11 stores with a condition linked to employment security, with the potential sale of the remaining 3 stores still being contemplated.

Massmart shares rose by 1.22 percent on the JSE on Friday to close at R49.60.

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