Retailer Massmart says it has started a consultation process under Section 189 of the Labour Relations Act that may affect 1 800 employees at Game stores in South Africa.
In a short update to shareholders on Tuesday, Massmart said the decision came after it “recently completed an assessment of opportunities to improve our South African Game store efficiencies”.
Section 189 of the act governs, among other things, the procedures that companies must be take ahead of any possible retrenchments.
In addition to Game, Massmart owns Makro, Dion Wired, Builders Warehouse and Masscash.
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 Babalo Ndenze for EWN
Parliament wants the government to find a way to stop the pending retrenchments at retail giant Massmart.
Mandla Rayi, chairperson of the Select Committee on Trade and Industry, Economic Development, Employment and Labour called on those departments to urgently intervene.
Massmart, which is majority-owned by US retail giant Walmart, has this week indicated it had started consultations with unions about the closure of up to 34 of its Dion-Wired and Masscash stores which could affect 1 400 employees.
Rayi said that it might not be ideal for the government to interfere in business but the severity of the pending retrenchments necessitated some form of intervention.
“We would like to have a meeting with the departments of employment and labour and DTI, with them telling us how far they’ve gone with regards to their intervention in this matter.”
He said that it was the very same government that facilitated the American owned Massmart’s entry into the South African economy.
“Remember when Massmart, an American company, wanted to come to South Africa, government was involved in facilitating their coming into the country, so we want them to get involved over the pending retrenchments.”
He said that the select committee would request a meeting with the departments of employment and labour as well as the trade and industry department to try to find solutions.
South Africa’s Massmart Holdings could cut up to 1 440 jobs under a plan to close some stores, the retailer said on Monday as it struggles to grow sales in a tough economy.
Massmart, majority owned by US retail giant Walmart, swung to its first half-year trading loss in two decades last August, as low growth, high unemployment and a rising cost of living hurt South Africans’ spending power.
The retailer said in a statement it had started consultations with unions and other stakeholders around the closure of up to 34 stores, following a review that identified a number of outlets that were underperforming.
“A total of 34 Dion-Wired and Masscash stores and approximately 1,440 employees are potentially affected by this process,” it said.
Dion-Wired is Massmart’s electronics and appliances subsidiary, while Masscash is its wholesale division including cash and carry, food and cosmetics outlets.
Massmart shares, which sunk to a 13-year low last year after the retailer issued a profit warning, were up 2.4%.
A number of Massmart’s rivals, such as Shoprite, are also struggling in the difficult market conditions, and both retailers have also had to battle currency weakness elsewhere in Africa, especially Zimbabwe and Nigeria.
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.
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.
Retail group Massmart said on Monday chief executive officer Guy Hayward would step down before year-end.
“After almost 20 years in the business, the past five of which have been as chief executive officer, Guy Hayward has informed the board of his decision to step down from his role before the end of 2019,” it said in a statement.
The exact timing of Hayward’s exit was still to be confirmed as he and the board embarked on the process of ensuring a seamless transition, Massmart said. The process to appoint his successor was underway and the board would make further announcements in due course.
It said Hayward had guided the company, which owns local brands such as Game, Makro, Builders Warehouse and CBW, through “exceedingly challenging market conditions” and had worked to position the business for future growth.
“Under his leadership we have seen the introduction of Value Added Services, the development of a shared group logistics service, and the implementation of competitive online offerings in Makro, Game and Builders Warehouse,” said the company.
“Massmart has an experienced executive management team, who along with Guy’s successor will continue to focus on the improvement of Massmart’s high-volume, low-expense business model that saves our customers money so that they can live better.”
Source: CNBC Africa
Massmart had a tough financial year, reporting a decline in headline earnings per share by 31.7 cents.
The biggest contributor to the company’s decline were Game, Dionwired and Hi-Tech.
Investors have been surprised by the extent of the decline.
According to Massmart CEO, Guy Hayward, the company’s sales are an accurate depiction of the general state of the South African economy.
“We are also disappointed in our profit growth, which is down 16%,” he says.
Food and Game are already 22% of total sales, and 2018 saw a move to Johannesburg and the restructuring of management and support roles.
“We are confident that we are doing the right things and that customers will respond to us in 2019,” Hayward says.
Turning Game around
Game will be kept very relevant to customers. The R20-billion business has up to 40% market share in many places; in fact, the company sees one in three TVs sold through it.
Going forward, Game will need to drive down costs and manage selling prices better.
“We need to make sure we offer customers wonderful merchandise that is very well priced. We need to shout about it; we need to make sure they know what they can buy in Game. We need to offer exciting products – maybe exclusive deals we have that no one else has, and we need to make sure our food is very well priced,” Hayward concludes.
Source: Trade Tatler
A trading statement from Massmart last week resulted in a corresponding -20% drop in the share price.
Sales for the 52 weeks through December grew just +2.9%, or +1.2% on a like-store basis, with sales growth slowing in all divisions except Massdiscounters (Game and DionWired) over November and December, despite satisfactory Black Friday sales.
The problems are three-fold:
- Part of the problem is of course the state of our economy and its shaky 1% growth
- Neglect on the part of the new parent company has played a role: Walmart has had much bigger fish to fry in India, China and online than the African market
- Walmart’s requirements in terms of organisational structure, processes and product standards have shackled Massmart’s ability to operate lighter on its feet, making competing against the independents difficult – from the types of products on shelf through to the freedom to trade on the shop floor.