SOUTH AFRICA – Consumer goods distributor Massmart says it has put up 14 Game stores in East and West African stores for sale to focus on its core strengths as the group losses narrowed during the half-year ended June 2021.
Massmart has begun a formal sales process to divest in five Game stores in Nigeria, four in Ghana, three in Kenya, one in Uganda and one in Tanzania.
Chief Executive Mitchell Slape has revealed that the company was currently in discussion with potential purchasers to take over the stores.
“We have reached the conclusion that the performance and complexity in running the 14 stores in five markets in east and west Africa is something frankly that we needed to address,” said Slape.
The decision to sell Game stores in east and west Africa comes a year after a review of the group’s portfolio outside of the Southern African Development Community.
Currency devaluations, low commodity prices and high inflation also saw Africa’s retail giant Shoprite a week ago announced plans to exit Uganda and Madagascar markets.
As part of its turnaround Massmart recently sold its Dion Wired stores, and a week ago announced the sale of Cambridge Food, Rhino and Massfresh as well as 12 Cash and Carry stores to Shoprite.
The deal is expected to close in early 2022 and is subject to regulatory approvals.
Slape said it was highly likely the transaction would succeed given its public and market interest.
“What is encouraging is that the BEE ownership structure is going to improve with this transaction. I think the most important reason why I think the regulatory process should move with speed is that we have 7,000 employees and jobs that sit in those businesses, we are confident that in the management of a business that is set up to focus on food, those jobs are going to be saved, that is a key element of the transaction,” said Slape.
Massmart recognized an impairment expense of R597.7 million (US$40.7 million), the majority of which related to Game’s SAP system software asset.
The group said Game’s total sales for the half-year 2021 of R7.6 billion (US$518 million) was 8.7 percent lower than June 2020, while comparable-store sales contracted by 6.9 percent.
“Foot traffic in many super and regional malls and retail centers remained constrained compared to pre-pandemic levels, as consumers preferred local and more convenient shopping options in light of Covid-19 infection concerns,” Slape said.
Group sales for the half-year ended June 27 of R41.3 billion (US$2.82 billion) representing total growth of 4.4 percent and comparable-store sales growth of 4.8 percent.
Gross margin increased by 43 basis points, and expenses decreased by 1.8 percent resulting in a trading profit of R444.2 million (US$30.3 million), an increase of 266.6 percent from the previous year.
The group incurred a net loss of R1.072 billion (US$73.4 million), an improvement of 8.1 percent from the prior period loss of R1.166.8 (US$79.5 million).
The headline loss amounted to R645.4 million (US$44 million), a 40.8 percent improvement from the prior period headline loss of R1.09 billion (US$74.3 million).
Massmart withheld the dividend payments due to the headline loss reported and the need to preserve cash, “as a result of the subdued economic outlook as well as the continued evaluation of the civil unrest impact, no interim dividend has been declared”.