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July unrest hits the bottom line of retailer Massmart

Massmart announced in a trading update on Friday that it expected its headline loss to widen up to 70 percent, in the 52 weeks ended December 26, 2021 knocked by the effects of the July unrest which resulted in store damages and lower trading income. Picture: Khaya Ngwenya/African News Agency (ANA)

Massmart announced in a trading update on Friday that it expected its headline loss to widen up to 70 percent, in the 52 weeks ended December 26, 2021 knocked by the effects of the July unrest which resulted in store damages and lower trading income. Picture: Khaya Ngwenya/African News Agency (ANA)

Published Feb 21, 2022

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TROUBLED Massmart is staging a battle to return to profitability.

The company announced in a trading update on Friday that it expected its headline loss to widen up to 70 percent, in the 52 weeks ended December 26, 2021 knocked by the effects of the July unrest which resulted in store damages and lower trading income.

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The market was not happy, which saw shares slide 2.99 percent to close at R52. The shares are now 41.57 percent lower than in the past three years.

The retailer has been running at a loss for the past three years. Game, one of its flagships, has struggled to return to profitability.

Massmart announced in August that it was selling its non-core food assets to rival Shoprite Holdings for R1.36 billion to focus on businesses with high returns.

The retail subsidiary of US giant Walmart, and owner of Builders and Game stores, told shareholders that the July civil unrest, which took place in KwaZulu-Natal and Gauteng, had greatly affected operations.

The headline loss, which excludes the Cambridge, Rhino, and Massfresh businesses was expected to decrease by between 60 percent and 70 percent.

Its 2021 headline loss was expected at between R1.48 billion and R1.57bn from the loss of R924 million in 2020. Its headline earnings per share was likely to be between 60.3 percent to 70.3 percent lower at between 684.2 cents per share to 726.8 cents.

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“As previously reported, earnings and headline earnings have been negatively impacted by the asset losses and loss of trading income suffered as a result of the looting, coupled with the timing differences relating to the recognition of business interruption insurance recoveries,” the retailer said.

The civil unrest had resulted in a R2.4bn stock replacement and property repair cost for the group. Forty-three stores were damaged.

Last year, it said it would pay R650m out of its pocket following the looting, as it had not fully recovered from its insurance cover. The company received an initial R435m insurance payout from the South African Special Risks Insurance Association (Sasria). It is set to receive a final R565m payout from Sasria this year.

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In its previous 52-week period ended December 26 results released in January, Massmart reported that sales fell in that period buffeted by Covid-19 liquor restrictions, riots, and global supply shortages.

At the time the company said despite the Covid-19 pandemic liquor restrictions, Massmart’s liquor sales saw a comparable sales growth of 39.8 percent. It said Builders, with total sales of R14.9bn, was 7.1 percent higher while comparable sales increased by 5.2 percent.

Game stores, however, continued to perform poorly as total sales of R15.3bn slid 8.1 percent, while comparable sales were 5.6 percent lower.

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Massmart announced a turnaround plan to stabilise performance in 2020. Part of its strategy included selling off its loss-making Cambridge grocery stores and closing its Dion Wired stores.

The group expects to publish its preliminary annual results to the market on March 7.

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BUSINESS REPORT ONLINE

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