Makro, Game owner posts R1bn loss, may sell stores

Source: Supermarket & Retailer

Makro and Game owner Massmart says that its losses for the half year ending 29 June 2020 will be slightly lower than previously expected – but it still expects to take a significant hit.

In a sales statement published on Thursday (20 August), Massmart said it expects headline losses for the period to be between 31% and 41% lower than the same period last year.

While this is down significantly, it is a slight improvement from the over 50% decline projected in June. The slight boost has been attributed to lighter lockdown restrictions which came into effect during that month.

The group anticipates a R1 billion to R1.1 billion headline loss for the period, extended from a loss of R800 million recorded in 2019.

“June 2020 marked an improvement in sales in comparison to sales in prior months during the national level 5 and 4 Covid-19 lockdown periods,” the group said.

“Liquor, general merchandise and home improvement sales benefited from pent-up consumer demand, resulting in total sales for June increasing by 0.8% compared to the same period last year.”

However, this was still not enough to improve sales figures from last year. For the 26-week period ended 28 June 2020, Massmart’s total sales amounted to R39.6 billion, representing a decrease of 9.7% on the same period last year, with comparable store sales decreasing by the same level. Internal product inflation is estimated at 3.7%.

Total sales from South African stores for the 26-week period decreased by 10.6%, while comparable sales decreased by 10.5%.

“The Covid-19 national lockdown in South Africa had a significant impact on the trading performance of the Massmart Group. For the 9-week period from 30 March 2020 to 31 May 2020, total sales were R4.6 billion lower than the same period last year,” the group said.

Operating costs attributable to the execution of safety protocols in group stores – in accordance with regulated requirements – amounted to R62 million on a YTD basis, while the group added that other indirect costs related to the pandemic increased by R13 million.

Further, Massmart said its earnings are expected to be adversely affected by the impairment of the carrying value of some store level assets, as well as retrenchment costs relating to the announced closure of all of the Dion Wired and 11 Masscash stores.

A possible sale of the Masscash stores is also currently under review, it said. Mashcash includes: CBW, Jumbo Cash and Carry, Trident, Shield, Cambridge Food and the Rhino Group.

 

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