THE new strategy involves collapsing the business into two divisions to improve capital deployment, unlocking brand synergies.     Henk Kruger African News Agency (ANA)
THE new strategy involves collapsing the business into two divisions to improve capital deployment, unlocking brand synergies. Henk Kruger African News Agency (ANA)

Massmart shares soar 6% on reorganisation plan to cut costs

By Sandile Mchunu Time of article published Jan 31, 2020

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JOHANNESBURG - Massmart yesterday rose more than 6percent on the JSE yesterday after the retail group announced plans to collapse its businesses into two divisions as part of a turnaround strategy to cut costs.

The group said Masscash, Masswarehouse, Massbuild and Massdiscounters would be reconstituted into two business units of Massmart Wholesale and Massmart Retail effective tomorrow.

The reorganisation would see Makro, Jumbo, Cambridge Food, Rhino Cash & Carry, Liquorland, Jumbo Shield, Saverite brands, Masswarehouse, Makro and Fruitspot brands forming the wholesale division, while Builders, Game, DionWired and Cambridge Food trading brands would form the retail arm.

Brian Leroni, a group corporate affairs executive, said the strategy would improve capital deployment, unlocking trading brand synergies and delivering bespoke retail and wholesale customer focus to customers.

Leroni said the strategy would also see Massmart driving market agility and effective execution, leveraging group-wide procurement scale and harmonising group-wide functional practice in line with best retail practises.

“One additional takeaway is that the internal merger of Makro and our Cash & Carry business creates a R50billion African Wholesale and B2B powerhouse.

“Specifically it offers suppliers the biggest single wholesale route to market on the African continent. An entity that will be integrated and driven by world-class Makro wholesale processes and systems,” Leroni said.

Early this month the group said it planned to cut up to 1440 employees jobs and close some stores.

New chief executive Mitch Slape has been tasked with a strategy of turning around the business, which has been battling under the low economic growth and constrained consumer spending.

Yesterday, the group reported a headline loss of between R1.1bn and R1.2bn for the 52 weeks to end December from a profit of R901million the prior year.

The group said in a trading statement that its net losses, including the effect of accounting standards that bring leases on to the balance sheet, could rise as much as R1.385bn.

Jordan Weir, a trader at Citadel, said the numbers did disappoint to the downside, although this was broadly anticipated.

“The share price was then largely expected to hold at its slightly lower level following its initial 5 percent drop, but surprisingly rallied more than 10 percent again after the market shock had subsided.

“This probably disgruntled quite a few short-sellers who were seemingly on the right side of the trade,” Weir said.

On the re-organisation of the business, Weir said according to Massmart the re-organisation of the group into two business units should bring about better unity in terms of business practices. The simplification of the company from four to two business units will more than likely also provide increased cost control and better operational governance for the group as a whole,” he added.

Massmart shares closed 6.44 percent higher at R53.75 on the JSE yesterday.

BUSINESS REPORT 

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