Massmart FY sales drop, Game continues to pull performance down

Makro and Builders Warehouse see positive sales growth boosted by retail sales and a recovery in liquor trading.
Image: Suren Naidoo

Retail and wholesale group Massmart saw a 1.9% decrease in total group sales for the 52 weeks ended December 26, 2021, to R84.9 billion. The decrease was as a result of Covid-19 induced restrictions on liquor trading and lost sales from stores damaged during the July riots and unrest-related supply chain issues, the group said in a Sens statement on Friday.

The July unrest which wrought destruction in economic hubs KwaZulu-Natal and Gauteng, following the arrest of former president Jacob Zuma, hugely affected the group’s trading capacity, with 43 stores sustaining damage.

“Local and global supply chain shortages coupled with the two Makro stores impacted by the riots in KwaZulu-Natal resulted in general merchandise sales, our second largest sales category, being 9.7% lower in Q4 2021,” Massmart says.

Massmart – owner of Game, Makro and Builders Warehouse – was one of the retailers hardest hit by the events of the July unrest, taking a R2.5 billion knock as a result of the damage caused.

Read: Massmart says 41 stores looted

Even more crippling was that the group expects to lose about R650 million as its cover with the South African Special Risk Insurance Association (Sasria) did not cover the full extent of its losses.

However, despite sustaining these financial blows, the group did see some silver linings, as its now more than two-year turnaround strategy – which was first implemented in January 2020 – is beginning to take shape under the leadership of CEO Mitch Slape, with the group managing to reach R1.3 billion of its R1.9 billion cost-saving targets in the 39 weeks to end September.

Read: Massmart surges over 8%, as turnaround gains traction

Top performers

The group’s Makro and Builders Warehouse-branded stores continue to perform well in the current reporting period, with both brands reporting increases in total sales.

In the full-year period, Makro’s total sales were 6.6% higher than the previous comparable period, bringing in R29 billion worth of sales.

The store saw a strong recovery in liquor sales in this period, as liquor trade restrictions eased across the country. Alcohol sales saw a comparable sales growth of 39.8% and general merchandise saw comparable sales grow of 7.2%.

Makro’s food division saw 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.

Read: Massmart’s reopened Makro Springfield store back to pre-unrest levels

At the same time Builders Warehouse saw a good performance, reporting a 7.1% increase in total sales for the period to R14.9 billion. This performance was boosted by retail sales, as trade sales remain subdued until contractors return to normal activity.

“Retail sales continue to perform at similar strong levels as seen throughout the year, whilst trade sales to contractors have remained subdued, due to slow re-commencement of Covid-19 impacted large commercial construction projects and infrastructure development by government, both of which remain at low levels,” Massmart says.

The group further notes a slowdown in fourth quarter sales in its home improvement and DIY product offerings.

Game continues to struggle

Discount appliance, electronics and food retailer Game continues to report disappointing sales in the current period, with total sales down 8.1% to R15.3 billion. In the previous comparable period, Game saw sales decrease by 15.5%.

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

The group says the poor performance can be attributed 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 [supply chain disruption] 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.

Read: Just how broken is Massmart’s Game?

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.

AUTHOR PROFILE

COMMENTS   0

You must be signed in and an Insider Gold subscriber to comment.

SUBSCRIBE NOW SIGN IN

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
BTC / USD

Podcasts

Instrument Details  

You do not have any portfolios, please create one here.
You do not have an alert portfolio, please create one here.
INSIDER SUBSCRIPTION APP VIDEOS RADIO / LISTEN LIVE SHOP OFFERS WEBINARS NEWSLETTERS TRENDING

Follow us:

Search Articles:
Click a Company: