Game on thin ice after R1.03bn net loss in 2021

By Myles Illidge for MyBroadband

Walmart will continue to support Massmart through its losses while the company implements changes at subsidiaries like Game needed to turn the business around.

This is according to Massmart CEO Mitch Slape, who told the Sunday Times that this support is not unconditional, and that their patience with Game had limits.

Massmart has seen three consecutive years of losses. In 2021, Game was to blame for nearly 47% — R1.03 billion — of the company’s R2.2 billion net loss.

Slape explained that Walmart knew Massmart’s executive team was intervening at Game.

This included selling fourteen stores in East and West Africa and selling fifteen “non-core” stores in South Africa.

According to Slape, if they get to a point where they don’t believe Game can be turned around, they would “assess it and make the appropriate decision.”

In its financial results for 2021, Massmart reported that its performance was impacted by two waves of Covid-19 and resultant lockdowns, as well as civil unrest.

“Black November and Festive season trading were also impacted by stock availability, resulting from the destruction of two distribution centres during the July unrest,” the company stated.

Massmart lost its primary import processing centre during the violence and looting in July 2021 and faced supplier stock-outs in the electronic goods and home appliances supply chain.

Alcohol bans and restrictions implemented during lockdowns cost Massmart approximately R1.8 billion in lost sales. According to the report, this translated to an estimated R193 million loss in sales margin.

Liquor sales contributed 15% of total sales in 2021, up from 13% in 2020.

According to Slape, the Russia-Ukraine conflict could aggravate the situation or provide an opportunity.

“The fallout that we’re seeing from some of that may result in higher inflation [and] certainly we’re seeing it in commodity pricing and things like that,” he told Cape Talk.

“I also think it creates an opportunity for Massmart in the sense that we are laserbeam focused on cutting costs, maintaining costs, and making sure we are in a position to keep our prices as low as possible.”

He explained that if there were price increases needed, Massmart would aim to be the last to implement them.

Massmart’s brands include Builder’s Warehouse and Makro, in addition to a range of food-focused retailers. It is majority-owned by US retail giant Walmart.

Builder’s Warehouse showed growth in 2021, reporting a trading profit of R1.18 billion — up from R1.03 billion in 2020.

Last year, Massmart announced that it was selling some of its food-focused retailers to Shoprite Checkers for R1.36 billion.

The company’s financial proceeds would be earmarked to pay down drawn bank facilities, invest in e-commerce, and merchandise areas in which Massmart is the market leader, such as general merchandise, DIY, and wholesale food and liquor.

 

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