JOHANNESBURG – Massmart on Wednesday reported it had received a R4 billion inter-company loan from Walmart, its parent and US retail chain giant, to help its liquidity constraints as it counted the cost of the Covid-19 lockdown period.
Massmart, which owns Makro, Game and Builders Warehouse retail outlets, told investors that the group had sufficient resources to meet its obligations.
“In addition to the facility support provided by local financial institutions, the group secured a R4bn inter-company loan from Walmart Inc to provide additional headroom in the event of unforeseen circumstances as we navigate through the lockdown period and beyond,” said Massmart.
Massmart’s shares rose 2.56% to close at R24.20 on the JSE yesterday.
However, it flagged that the Covid-19 pandemic lockdown regulation, which restricted movement, had a significant knock-on effect on its trading performance.
Massmart said loss per share and headline loss per share would take a nosedive of a least 50 percent or 191.1 cents per share and 182.4 cents per share, respectively, worse than the loss per share and headline loss per share for the same period last year of 382.2 cents per share, and 364.7 cents per share, respectively.
“Excluding the impact of the Covid-19 lockdown, we expect the loss and headline loss would have been slightly better than the same period last year,” said Massmart.
Massmart also estimated a staggering R2.3bn in missed liquor sales for April and May based on prior year sales due to Covid-19. It said, however, that in line with level 3 lockdown regulations from the beginning of June it was now able to trade in all product categories with the exception of tobacco and related products.
Group performance improved and moving to level 4 lockdown from the beginning of May enabled Massmart to ease into trading in more categories.
“With the easing of the lockdown from level 5 to level 4, pent-up demand for home improvement products drove strong sales at our Builders stores during May, while pent-up demand for general merchandise goods supported better sales performance at Makro and Game as the month progressed,” said Massmart.
The company said for the 9-week period from March 30 to May 31, total sales were R4.6bn lower than the same period during the prior year.
Massmart said that total sales for the 23 weeks ended June 7 amounted to R34.8bn, which was 10.3 percent lower than the prior year, while comparable store sales were 10.5 percent lower than last year.
Sales from South African stores amounted to R31.3bn, 11.5 percent lower than last year, with comparable store sales decreasing by 11.5 percent, Massmart said.
Lulama Qongqo, an investment analyst at Mergence Investment Managers, said Massmart’s improvement in sales momentum post lockdown was an indication that they sold products that were relevant to consumers but they just needed to do it profitably.
“Although they are doing better relative to when we were in lockdown, it doesn't change that performance is clearly worse than last year – the current conditions have made their strategic initiatives even harder to achieve and as much as the Walmart loan is helpful, they still need to pay it off,” Qongqo said.
Qongqo said the R4bn inter-company loan from Walmart, depending on the terms of that loan, increased the probability of Massmart at least surviving tough trading periods caused by Covid-19 because it helped with liquidity constraints.