Massmart’s trading update highlights challenges

Jon Wright
Head of Insight - RA EMEA
@RetailAnalysis

Date : 17 June 2020

South Africa-based, Walmart-owned Massmart has released a trading update for the 23-week period ending 7 June. In it the retailer underlined the challenging market conditions it has operated in and which continue to affect its performance.

Total sales fall by 10.3%

Massmart reported total sales of ZAR34.8 bn (US$2.0 bn). During the 23-week period total sales fell by 10.3%, while comparable store sales were 10.5% lower. Sales in its home market fell by 11.5%, to ZAR31.3 bn (US$1.8 bn), with comparable store sales falling at the same rate. For its operations outside South Africa Massmart said total sales rose 1.2%, to ZAR3.5 bn (US$204.4m), while comparable sales fell by 0.3%.

The retailer said the lifting of certain lockdown conditions had enabled it to benefit from ‘ pent-up demand for home improvement products… 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’.

Coronavirus raising costs for the retailer…

Massmart said operating costs generated by regulatory requirements in relation to in-store safety protocols were estimated at ZAR50m (US$2.9m). It said the lockdown in South Africa had had a ‘significant impact’ on its trading performance, with total sales ZAR4.6 bn (US$268.7m) lower in the nine-week period from 30 March to 31 May 2020, versus the same period in 2019.

…But not slowing implementation of turnaround plan…

Massmart underlined how the pandemic had not impacted on the implementation of its turnaround plan. Indeed, it noted how elements of the plan had been accelerated as a result, such as the cost-reset project, its restructuring of the Group into wholesale and retail business units and the execution of the specific turnaround plan at Game.

…which includes increase in focus on ecommerce

Separately, as part of an interview in local publication Business Times, Massmart’s new chief executive, Mitchell Slape, set out the company’s plans to invest heavily in its ecommerce operations. Slape was quoted as saying, ‘Our ecommerce business, and this is true in our various formats whether you think of Builders Warehouse or Makro or Game, is up significantly. We are running, even as we went into May, triple-digit increases over the prior year in terms of sales growth…’.

One initiative that will support this aim is the retailer’s announcement of a partnership with OneCart for its Makro banner. Shoppers will be able to purchase from a range of 11,000 products from Makro, which includes a selected range of about 120 liquor products. The full range will be available initially from three stores, with more expected to be added in the short term.