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Massmart continues to lose sales, extending its two-year streak of volume declines

ALTHOUGH the group is scoring positive sales performance trends for its Game stores category in South Africa, sales in the unit declined by 1.8 percent during the period under review.

ALTHOUGH the group is scoring positive sales performance trends for its Game stores category in South Africa, sales in the unit declined by 1.8 percent during the period under review.

Published May 20, 2022

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MASSMART Holdings continues to lose sales, extending its two-year streak of volume declines with a further fall in the 19-week period to the end of the first week of this month amid tightening economic conditions that have hit consumers’ disposable incomes.

Shares in Massmart on the JSE traded 8.3 percent weaker at R37 in afternoon trade yesterday. Shares in other South African retailers Pick n Pay and Shoprite traded 3 percent and 2 percent weaker at R54.7 and R206.6, respectively.

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Wayne McCurrie, a wealth and investments analyst at FNB, said Massmart was “feeling the cost pressures the same as everyone else” in South Africa. The weighted average sales inflation across Massmart’s operations topped 3.6 percent, primarily driven by the foodstuffs and do-it-yourself categories.

The holding company for Game, Builders and Makro in South Africa and other regional neighbours said in a trading update yesterday that it had been impacted by “higher product and supply chain costs” in the year-to-date period.

“Sales from our ex-South Africa Game stores decreased by 12 percent on a total and comparable stores basis, as operations in various markets were impacted by depressed in-stock levels resulting from regional supply chain challenges specific to those markets,” the company said.

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Although the group is scoring positive sales performance trends for its Game stores category in South Africa, sales in the unit declined by 1.8 percent during the period under review.

Across the group, sales for the 19-week period ending May 8, 2022 amounted to R30.4 billion, representing a 0.2 percent decrease compared to the same period in the prior year.

This represents a continuation of the trend of declining sales for the company in the past two years. Massmart sales for the full-year period ending December 2021 declined by 1.9 percent to R84.9bn.

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In 2020, the company recorded a massive 7.7 percent lowering in sales, which stood at R86.5bn. In 2019, Massmart incurred a net loss of R1.3bn.

In the latest period under review, Massmart’s Builders division sales volumes decreased by 3.9 percent “on the back of an exceptionally strong base” in 2021.

“Trade sales continue to be challenged by the slow recovery of the commercial construction industry, while general home improvement market growth is slowing compared to the exceptionally strong Covid-19-induced growth of the last 24-month period.”

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Makro South Africa, however, was a bright spot for Massmart in the review period, with food and liquor sales performing well. This is mainly as a result of cash-strapped consumers focusing “their spending more toward non-durable items”.

The civil unrest that swept across KwaZulu-Natal and parts of Gauteng in July 2021 impacted re-stocking of affected stores under the Cambridge brand. As a result, total sales under Cambridge at R2.2bn are 18.6 percent lower compared to the same period last year.

“Sales were directly impacted by the civil unrest that took place in July 2021, as stores impacted and reopened have not re-introduced all product categories. This has been exacerbated by customers in this segment of the market being mostly impacted by the pressures of increased unemployment and lower disposable income,” Massmart said.

Income from Massmart sales across its regional markets outside South Africa also shrank by 0.6 percent during the period.

Additionally, currency fluctuations in the rest of Africa category continued to impact Massmart negatively, especially in relation to foreign-denominated leases and payables. The foreign exchange loss from the regional operations amounted to R381.1 million for the period.

BUSINESS REPORT

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