Retail giant Massmart, which owns Game, Builders Warehouse and Makro, has confirmed it had a difficult trading period in the first half of this year.
The Group which was affected by last month’s looting and mayhem, today reported its interim results for the 26 weeks which ended on 27th June. Mitchell Slape, CEO of Massmart says lockdown restrictions due to COVID-19 made doing business difficult for them – especially their wholesale department.
Despite this, the Group reported positive growth with sales at R37, 1 billion or a 6.1 percent increase in the first half.
Massmart CEO Mitchell Slape outlined the tough trading conditions the company has been through.
“We are seeing various forms of lockdowns and changes in restrictions and we have also experienced continued disruptions to our trading and this has impacted in a significant way both our wholesale and retail customers. On the wholesale side, we have seen demand in food, liquor and consumable sales among our core hotel restaurant and catering customers been impacted by restrictions on their businesses. In addition, we have seen a constrained lower to middle-income consumer in terms of their focus and ability to spend on discretionary items.”
Massmart also confirmed that the civil unrest and looting directly impacted 43 of their stores, with a loss of R1.3 billion. They are still assessing the losses. The majority of the affected stores are still in the process of being reopened. Sales in the shops affected were approximately R708 million lower compared to the same seven-week period last year.
Massmart Chief Financial Officer Mohammed Abdool Samad, “Facilities that were targeted were two distribution centres and 43 stores, the two DCs being in KwaZulu-Natal. We are pleased to report that almost 80 percent of our facilities will be back up and running by the end of November just in time for the festive season. Our priority when the riots broke out was to our customers and associates safety which we achieved. We have supplied food hampers to our affected associates. Walmart and Massmart committed R30 million to hunger relief organisations.”
Samad says although they had a 6.1 percent increase in sales in the first half of this year, they are still six percent lower than their 2019 levels or pre-COVID-19 levels.
“Sales are R37.4 billion and 6.1 percent up on the prior year with 11 basis improvement in our margins. Our expenses have been really well controlled down 2.4 percent on a year to year basis, which has resulted in a trading profit of R792 million. And this is R700 million up from the prior year. This is culminated by our headline loss reducing by just under 55 percent.”
Samad says the hospitality and tourism industries, which are still feeling the impact of lockdown restrictions, had a negative impact on their wholesale business. The Group also lost R650 million in liquor sales due to lockdown restrictions.
“This is mainly wholefood sales being down by 5.4 percent and that is due to the hospitality industry being depressed. Again food sales are down by 31 percent and that is due to two factors, as we see the pandemic spreading we see consumers going to neighbourhood shopping and online and also our strategy to remove fresh and frozen from our Game stores have also resulted in the food sales at Game dropping.”
Despite the negative trading environment, the Group says they were able to minimise costs by reducing rentals by over R180 million.
They also saw cost reductions in consultants and travel expenses.
Massmart says it also reported strong online sales at Game.
