Massmart reports marginal decline in total sales by 1.9% to US$5.4 billion

SOUTH AFRICA – Consumer goods distributor Massmart has reported a 1.9% decrease in total group sales for the 52 weeks ended December 26 2021 to R84.9 billion (US$5.44 billion).

However, the group which also owns Game brands, said its total comparable stores sales were 1.7% higher.

The decline in total sale was as a result of Covid-19 induced restrictions on liquor trading and lost sales from stores damaged during the July riots and July unrest related supply chain issues, the group says on Friday in a Sens statement.

The July unrest which swept destruction through two of the country’s economic hubs – KwaZulu-Natal and Gauteng, hugely affected the groups trading capacity as 43 stores sustained damage as a result, costing the retailer R2.5 billion (US$160m) financial burden.

Even more crippling was that the group expected to lose about R650 million (US$41.6m) because its cover with the South African Special Risks Insurance Association (Sasria) did not cover the full extent of its losses.

In the full-year period, Makro’s total sales were 6.6% higher than the previous comparable period, bringing in R29 billion (US$1.86m) worth of sales. Comparable sales increased by 10.6%.

Despite the government imposed Covid-19 sales bans, liquor had a comparable sales growth of 39.8%, while comparable general merchandise sales grew by 7.2%.

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Its Makro’s food division saw a slightly weaker growth however, with comparable sales only increasing by 1.5% due to below average activity in the hospitality sector.

“Business activity specifically in the hospitality and catering sector remains at lower-than-normal levels, as this industry was impacted by various levels of trading restrictions as well as international travel restrictions during the year,” Massmart said.

The group’s wholesale and cash-and-carry division, made up of the Jumbo Cash & Carry and Shield brands, had a 6.3% decline, which Massmart attributed to lower sales in the hospitality, restaurant and catering sector due to Covid-19.

Meanwhile, Game continues to report disappointing sales in the current period with total sales down 8.1% to R15.3 billion (US$979m). In the previous comparable period, Game saw sales decrease by 15.5%.

South African stores saw a sales drop of 6.9% while its beyond-the-border sales saw a 12.8% drop.

The group says the poor performance can be attested to poor consumer foot traffic in malls and mounting spending pressure on its core customer base.

“Notwithstanding continued lower mall-based foot traffic and the discretionary spending pressure on Game’s core customer, the Game supply chain was particularly susceptible to unrest-related supply chain disruption.

“That resulted in insufficient in-stocks of some core appliances and home electronics in the period following the unrest, exacerbated by lower in-stock levels on key lines of certain electronics and appliance products as a result of global supply shortages,” the group said.

The group’s discontinued operations, made up of Cambridge, Rhino and Massfresh were also hit hard, with their sales falling by 18.8% to R7.2 billion (US$461m).

In December 2021, the group announced that it had identified 15 Game stores it was looking to possibly sell. This move would reduce the group’s Game store footprint from 114 stores to 99 stores.

Massmart said the sale would form part of its initiative to optimise the store’s portfolio.

“This decision represents an intensification of our initiative to optimise the Game store portfolio as we move beyond our turnaround imperative, to prioritise investment in core and high returning trading assets,” the group noted.

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