With Massmart’s share price still trading at around half its value compared to a 2020 peak of just over R59 in February, the group’s American CEO Mitch Slape is effectively taking a personal R8.18 million bet on turning around the loss-making retail and wholesale giant.
Massmart, which owns the Game, Makro, Builders Warehouse and Cambridge Foods chains, confirmed in a JSE Sens statement on Wednesday that Slape had purchased 300 000 ordinary shares in the group.
The shares were purchased in an on-market trade at a weighted average price of R27.29 a share by the Slape Family Trust, which is incorporated in the US. Slape is a director and beneficiary of the trust.
The move represents a significant vote of confidence in Massmart by its most senior executive, who officially took over as CEO just over a year ago on September 1, 2019.
Slape was parachuted into the position by US-based retail conglomerate Walmart – Massmart’s majority shareholder, which seems to have taken much more serious interest in the group over the last year.
His investment was well received by the market on Wednesday, with Massmart’s share price rising 3.65% to close at R28.71. On Thursday the stock surged more than 7% by around 14h30 South African time, taking it beyond the R30 a share mark and its highest level since April.
The stock is still down more than 45% since the beginning of the year, largely due to the impact of the Covid-19 pandemic on the retail sector.
However, it’s worth noting that Massmart has seen around 80% of its market cap being wiped off the bourse since Walmart took a controlling stake in the group back in 2010.
Massmart reported its first full-year loss last year since listing on the JSE in 2000.
Slape’s turnaround plans have taken a knock this year due to the Covid-19 economic fallout, with the group reporting a headline half-year loss of R1.1 billion last week.
Slape however insisted during the group’s interim results presentation that the turnaround is well on track. In fact, he intimated that the restructuring is being accelerated by Covid-19, with tough decisions being made such as the full closure of its DionWired chain and some of its former Masscash stores.
Veteran retail analyst Syd Vianello tells Moneyweb Slape’s investment shows he clearly has great confidence in his strategy to turnaround the group.
“He is putting his own money on the line to demonstrate this. The strategy itself cannot be faulted… The unknown is whether customers will like the reintroduced clothing offer [in Game stores],” he notes.
“Only time will tell on that one. Remember people don’t buy clothing they don’t like – no matter what the price,” adds Vianello.
Listen to Ryk van Niekerk’s interview with the Massmart CEO: