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Massmart looks to new CEO to beat slump

Expects full-year earnings to drop at least 50% from a year earlier.
Massmart’s shares have slumped 62% this year, the most of the 13 stocks on the FTSE/JSE Africa General Retailers Index. Picture: Bloomberg

Massmart  is looking to a new chief executive officer to help arrest a slump even as the South African retailer controlled by Walmart sees a further deterioration in the nation’s consumer environment.

The household goods specialist reported total sales of R43.8 billion in the six months through June, up 5.5% from a year earlier, reporting a net loss of R836 million from a year-earlier profit, the Johannesburg-based company said in a statement on Thursday.

With no catalyst to revive a moribund South African economy, Massmart expects full-year earnings to drop at least 50% from a year earlier.

Key insights

Mitchell Slape will start as new CEO next week after Massmart in May said the 24-year Walmart veteran would be in charge of leading a turnaround. The Johannesburg-based company cut its full-year dividend by 40% earlier this year and scrapped its interim dividend because of the loss.

Some analysts have questioned if Walmart may even pull out of South Africa, as the country is one of the global retailer’s most vulnerable markets. Walmart bought a majority stake in Massmart in 2011 for 16.5 billion rand and has also reported hurdles in China, India and the UK.

It’s certainly not easy for any of the South African retailers as the continent’s most-industrialised economy battles with stubbornly high unemployment and consumer confidence that’s been dented by rising taxes, fuel costs and other bills.

Market reaction

Massmart’s shares have slumped 62% this year, the most of the 13 stocks on the FTSE/JSE Africa General Retailers Index. The stock fell the most since at least 2000 on July 30 after reporting a first-half loss.

Read the full Sens announcement here.

© 2019 Bloomberg L.P.

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