Tag: Makro

Source: Supermarket & Retailer 

Retailer Massmart, whose brands include Makro and Game, says SA’s Covid-19 lockdown resulted in about R2.3bn in lost liquor sales in April and May.

This is based on comparable sales in 2019, the group said, as it warned the pandemic had worsened losses this year, though pent-up demand had helped sales as SA’s lockdown has eased from level 5.

The group said in a trading update that it expected its headline loss per share for the 26 weeks to end-June 28 to be at least 50% worse than the headline loss per share of 364.7c previously.

Total sales for the 23 weeks to June 7 2020 amounted to R34.8bn, which is 10.3% lower year on year. Sales from its SA stores amounted to R31.3bn, 11.5% lower than last year.

The group said operating costs in line with higher safety protocols amounted to about R50m, but that it was comfortable with its balance sheet, and had secured a R4bn intercompany loan from parent Walmart.

The retailer is implementing an organisational shake-up that has seen its four divisions reorganised into two business units. It said, saying on Wednesday it was continuing this plan.

Massmart Retail will comprise the Builders, Game, DionWired and Cambridge Food trading brands.

Massmart Wholesale will take in Makro, Shield and the group’s wholesale cash brands.

By Sibongile Khumalo for Fin24

Strained by operating under lockdown conditions since the end of March, the Wal-Mart owned Massmart is now seeking rental relief to manage its cash position.

The company’s stores such as Makro, Game and Builders Warehouse have only been allowed to sell essential goods during the lockdown period with the sale of alcohol banned under the current regulations.

“We will continue to proactively work with all suppliers and stakeholders to manage our cash position going forward including,” the company said in a trading update on Monday.

To save cash, it is “negotiating and participating in the rental relief package from the Property Industry Group”.

Various retailers have been hit by the shutdown or limited trading conditions and have been locked in rent negotiations with landlords, with property groups saying the lockdown is likely to have a negative impact on the commercial real estate, as Fin24 reported.

Massmart, which went into the lockdown already struggling under the weight of a sluggish economy and poorly performing Game stores, reported an almost 12% decline in sales for the 19 weeks to May 10.

The Covid-19 financial challenge comes on the back of declining profits as the group in 2019 reported a R861 million loss. This year it shut down its poor performing DionWired electronic stores and revealed that it would consider whether to close the 11 non-performing Masscash stores.

“We should also take into account that the company had lost a bit of market share before Covid-19 hit, the pandemic is now likely to delay their turnaround,” said Nolwandle Mthombeni, equity analyst at Mergence Investment Managers.

READ: Game, Makro and associated retailers freeze prices for essentials during lockdown

Mthombeni mentioned that the virus would have a “domino effect” on real estate as whole because landlords will now have to negotiate lower monthly rental with tenants who are battling cash flow challenges. The effect is also likely to extend to financial lenders as well, she said.

“Every single day of lost trade means income loss for retailers.”

Government has come under increasing pressure from various business organisations and political parties to open the economy, as companies continue to take a pounding from the restrictions.

South African has since moved to ease trade regulations as the country moved to level 4 of the lockdown and allowed the sale of winter clothing. By the end of the month, the country moves into level 3, which will allow for alcohol sales to resume, a significant category for retailers such as Massmart.

By Londiwe Buthelezi for Fin24

Last Thursday, all Makro stores across the country were shut following issues that caused disruption in the company’s trading system.

“Makro experienced some system-related issues this morning impacting our ability for stores to operate normally. This has now been resolved and all stores are operational … We would like to extend our sincerest apologies for the inconvenience caused to our customers,” said Makro Communications and Stakeholder Engagement Manager, Welisa Nene.

Makro tweeted an apology to customers at around 13:00 on 2 January.

“We apologise for the inconvenience caused while our stores have been closed today. We were experiencing a technical issue which has now been resolved. We are now open for trading,” it said.

Earlier in the day, customers were turned away at Makro stores in the Western Cape and Gauteng, while some remained in hopes that outlets would reopen soon.

Makro Woodmead in Sandton remained close past lunchtime, even though Makro tweeted that stores had reopened.

Massmart flagged the issue of downtime at Makro during the group’s interim results announcement in August. It said the system downtime was due to the implementation of a new system as the retailer switched from its legacy online system early in 2019.

But last year the downtime issues only affected online sales, which accounted for a mere 0.8% of all sales in Makro outlets. Signs at some of the stores on Thursday indicated that till points were also affected this time around.

Makro has 22 stores around the country trading in general merchandise, food and liquor. Nene confirmed that the downtime only impacted these 22 Makro stores across the country, and no other Massmart chains.

Will Walmart call it quits in SA?

According to a recent Business Day article, Massmart – who owns brands such as Game and Makro – is in trouble.

The company recorded a R550-million loss to June 2019, and investors have been told earnings will likely be less than 50% of what they were in 2018.

  • Walmart is the world’s largest bricks-and-mortar retailer. The company paid $2.3bn to buy 52% of Massmart in 2011
  • Walmart paid R148 a share, but today share prices stand at R44 – a 70% drop in value
  • Speculation is rife that Walmart may pull out of SA rather than buy the other 48% of Massmart
  • SA won’t be the first country Walmart has exited. It also gave up on Germany, Britain and South Korea, and is currently scaling back in Brazil
  • In 2010, Massmart generated cash of R2.6bn and paid dividends of R822.4m
  • By 2018, cash flow was at R2.8bn, and dividends marginally lower at R750m
  • Massbuild (primarily Builders’ Warehouse) would be an easy sell but it would be a struggle to find buyers for Massdiscounters (Game and DionWired) – stores that have been hard-hit by online competition
  • Other businesses in the stable are Masswarehouse (Makro and The Fruitspot) and Masscash, whose brands include Jumbo Cash & Carry and Cambridge Food
  • By 2020 it will be clear whether or not Walmart can extract value from its African conglomeration, or whether it breaks it into its pre-1990s components and sells them off.

Makro aims for sustainability

Since the Walmart deal, Massmart has struggled a bit, as Africa, with currencies shaky and commodities down, has failed to deliver immediately on the promise, and as ill economic winds buffet the local consumer.

Their 2015 results were not all that. But they’ve stuck to their guns in key areas, and this should make for steady improvement in the medium to long term.

One of these areas is sustainability, as embodied by the new Makro, the first to make use of renewable energy, in Carnival Mall, Jozi, where solar panels will produce 1-million kWhs of electricity every year, only a little of which will be consumed by the LED bulbs which make up 100% of the store floor lighting.

Daylight will be harvested, and refrigeration will be provided by high-performance CO2 plants.

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