Massmart’s half-year losses narrow as turnaround strategy takes shape

SOUTH AFRICA – Struggling South African retail giant Massmart is starting to see returns from its turnaround strategy with losses narrowing by 8.1% in the first half of 2021 financial year. 

According to a release from the company, the group incurred a net loss of R1. 0725 billion (US$74.26 million), a slight improvement from the prior year loss of R1.1668 billion (US$115.5 million).  

Even with the company recording net losses, other parameters show that the much-vaunted turnaround strategy under the captainship of CEO Mitchell Slape is starting to yield some results.  

Massmart for instance recorded a half year trading profit of R444.2 million (US$30.76 million) compared to a loss of almost R267 million (US$18.49 million) in HY2020. 

Massmart, which owns Makro, Game and Builders Warehouse stores, noted that this group wide trading profit for the interim period ended June 27, 2021, represents an increase of 266.6% from the comparative half year. 

“The group’s performance was supported by strong profit before interest and tax [PBIT] increases at Builders [up 184%] and Massmart Wholesale [which includes Makro], up 70%,” it said 

What weighed the retail chain down leading to net losses were however impairments, largely linked to its embattled Game chain, together with foreign exchange losses and interest expenses. 

“Impairment expenses of R597.7 million (US$41.39 million) were recognised during the period,” Massmart notes in its interim results Sens statement. 

“Foreign exchange losses of R87.9 million (US$6.09 million), decreased by 21.7% from the prior period. Interest expenses of R870.1 million (US$60.25 million) decreased by 5.1% from the prior year due to decreased average borrowings and lower interest rates.”  

Massmart points out that as a result of the above scenario, the group’s headline loss amounted to R645.4 million (US$44.69 million), a 40.8% improvement from the prior period headline loss of R1,0903 billion (US$75.48 million). 

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Even with losses being significant, their continued decline shows that Slape’s turnaround plan is taking shape. 

Massmart even reported total group sales for the interim period of R41.3 billion, which represents comparatively modest total sales growth and like-for-like store sales growth of 4.4% and 4.8%, respectively. 

The recent unrest in KwaZulu-Natal and Gauteng, as well as the ongoing impact of the Covid-19 pandemic on SA’s retail sector will however continue rocking the boat of retail giant. 

The July unrest in KwaZulu-Natal saw the group being hit by R1.3 billion (US$90 million) in stock losses due to looting, largely at its Riverhorse Valley distribution centre (Durban) and Makro stores in Springfield (Durban) and Pietermaritzburg. 

This setback will impact the second half of Massmart’s 2021 financial year, as the unrest took place post its interim reporting period. 

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