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Massmart reports its first FY loss since listing on the JSE

Declares a R1.3bn loss, share price slides.
Massmart, which is looking to close down its loss-making DionWired stores, reported a loss of R1.3 billion for its 2019 financial year. Image: Supplied

Walmart-controlled SA retail and wholesale group, Massmart, on Thursday officially reported its first ever full-year loss since listing on the JSE in 2000.

The group posted a R1.3 billion loss for its 2019 financial year to December 29, compared with a profit of R900 million in 2018. Its headline loss came to R1.1 billion for 2019 (2018: R900 million profit).

Massmart, which runs retail and wholesale chains such as Game, Makro, Builders Warehouse and DionWired, did not declare a dividend for the year due to the loss. The confirmation of the extent of its loss, saw the group’s share price slide almost 5.5% by 4pm on Thursday.

“Total sales for the 52-weeks ended December 29 of R93.7 billion, represents sales growth of 3%, with comparable sales growth of 1.5%. Trading pressures resulted in the gross margin declining by 54 basis points, with expenses increasing by 5.9%. This resulted in a trading profit of R1.1 billion, 46.3% lower than 2018,” the group noted in its Sens statement.

It also reported impairments of R229.5 million for the year, which included asset write-downs related to non-profitable stores in its Massdiscounters and Masscash divisions.

“The sales performance across our major categories is reflective of the spending pattern of a financially-constrained consumer who continues to prioritise spending on non-durables over durable goods,” it said.

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New Massmart CEO Mitch Slape, who took over the hot seat in September last year, said during a results media conference call that while the group’s 2019 financial performance was “disappointing”, there were “green shoots” for the year ahead.

Mitch Slape, Massmart’s new CEO, who has been in the hot seat since September. Image: Supplied

He said Massmart was now working hard in turning the business around, with the group’s six-point turnaround plan, which was announced at the end of January, now gaining traction.

Besides an overhaul of the group’s structure into just two divisions housing its various retail and wholesale brands, Massmart has taken the tough decision to close 34 DionWired stores and stores in the old Masscash division. This could affect some 1440 jobs.

He said the Section 189 process was currently underway, however, he could not share much more detail until the process is finalised.

“Our road to recovery acknowledges that the core underlying business is strong and comprised of entrenched brands with high customer appeal. However, the landscape has changed, and we have been slow to respond. We are now acting with urgency to reset and unlock the real potential of our business,” Slape said.

“These results are also indicative of an outmoded and inefficient approach to our markets. It is against this backdrop that we have launched a business turnaround process comprising a series of urgent and deliberate interventions that were shared with the market on 30 January 2020,” he added.

Massmart’s six-point turnaround interventions include:

* Unlocking benefits of group scale by implementing a retail and wholesale focused operating model, supported by centres of excellence;

* Establishing a R50 billion consolidated, low-cost wholesale route to market with high relevance to customers and suppliers;

* Positioning the group supply chain to improve stock availability, increase supplier income, and reduce operating costs and working capital;

* Pursuing a R1.5 billion cost reset opportunity covering expense lines including; rental, utilities, technology infrastructure and applications software;

* Driving a significantly better basic operational execution at Game to restore sales growth, recover margins and operate as a low-cost discounter; and,

*Closure (subject to a Section 189 consultation process) of 34 persistently unprofitable DionWired and Masscash stores.

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And what does the ex CEO Mr Guy Hayward have to say about this scandalous result?
Will he return is colossal income? And as usual where are the great South African fund managers on cleaning up this mess?

I can just imagine the pie in the sky budgets.

Litmus test of the SA economy.

Not just the economy.
Last time I went to the Woodmead Makro I was amazed at the poor levels of customer service.

1. Find a way to get the staff to treat you like a customer, not like they’re doing you a favour.
2. What is it with that queue that snakes through the store to get to the tills. Surely that’s a sign for more till points.
3. To add insult to injury, queue again for the “security” to check that you haven’t pinched anything.

Fix those things and the customer might come back more often.

Nope, not really. Bad management is just plain bad management.

I bet some really basic issues to be resolved. Hi-Flying manangers travelling 1st class over the world. Poor service at stores. Too wide and too deep product range. Demands on suppliers to pay rebate and suppliers found an alternative channel . Expensive logistics ..list can go on and one. Simply poor management

End of comments.

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