Massmart sells eight cash and carry stores, seeks to close more outlets to stay afloat

SOUTH AFRICA – The Competition Tribunal of South Africa has approved Walmart owned South African retailer, Massmart, to sell eight of its Masscash stores to unlisted Johannesburg-based Devland Cash and Carry, for an undisclosed amount.

The Masscash division consists of a wholesale segment with cash and carry food and cosmetics businesses, and retail food outlets which target the lower consumer groups.

Its wholesale division consists of CBW, Jumbo Cash and Carry, Trident and Shield stores whilst the retail division is consolidated under the Cambridge Food banner and the Rhino Group.

The approval of the sale moves Massmart a step closer to completing its turnaround plan, which aims to improve efficiencies, save costs and address underperforming stores.

As of June 2020, the Masscash division had 131 food retail and wholesale outlets

Last year in January the US based retailer had indicated its intention to potentially close 11 underperforming Masscash stores, but later identified a potential buyer for eight of the outlets.

According to reports by Reuters, the potential sale of the remaining three is still under consideration.

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As of June 2020, the Masscash division had 131 food retail and wholesale outlets.

The merger between the retailers was approved on condition that no employee will be laid off for a period of nine months following the transaction’s implementation date, saving at least 640 jobs.

“The Tribunal has imposed a condition that no employee will be retrenched as a result of the merger for a period of nine months following the transaction’s implementation date,” the watchdog said in a statement.

Devland owns and controls over 20 stores that are active in the retail and wholesale trade of groceries and related products.

Other than the sale of the eight outlets, Massmart is seeking to close 14 more Masscash stores and has flagged a deeper full-year net loss of more than R1.7 billion (US$116.8 million) after curbs related to the COVID-19 pandemic hammered sales.

The Game and Makro department chain owner said it expected a net loss of between R1.711 billion (US$116.72m) and R1.776 billion (US$121.15m) in the year to Dec. 27, compared to a net loss of R1.3 billion a year before.

It said its headline loss however, the main profit measure in South Africa, would slightly narrow to between R901 million (US$61.4m) and R958 million (US$65.3m) from R1.2 billion (US$81.8m).

Massmart estimated that lockdown curbs, including extended restrictions on liquor trading, lowered its 2020 sales by at least R6 billion (US$409.3m) year-on-year.

The supermarket chain owner was under pressure even before the pandemic as cash-strapped customers battled high unemployment, modest wage increases and higher average fuel and utility prices, incurring an impairment loss of about R798 million (US$54.4m).

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