Tag: Massmart

Game owner Massmart acquires OneCart

By Penelope Mashego for News24

Makro and Game owner, Massmart, has acquired a controlling stake in online shopping and delivery platform, OneCart.

On Wednesday, Massmart announced that it reached an agreement to acquire 87.5% of OneCart after informing the market that both parties had been negotiating the transaction in August.

The online shopping and delivery service’s partners include Woolworths, Pick n Pay Dis-Chem and Clicks.

The acquisition forms part of Massmart’s e-commerce growth strategy.

“We are excited by the opportunities that this acquisition presents. eCommerce continues to grow rapidly, both in South Africa and for Massmart, contributing up to 3-4% participation in overall retail sales. We don’t expect this growth trend to change and have embarked on implementing the fundamental building blocks required for a strong ecommerce offering,” said Massmart’s vice-president for group eCommerce, Sylvester John.

He added that Massmart would continue to support OneCart’s independent retailer marketplace model, while growing the platform and enhancing customer experience.

The retail chain owner will provide equity funding to OneCart through an unsecured convertible loan and acquire shares from current OneCart shareholders. Onecart’s founder Lynton Peters and a minority shareholder will own the balance of the shares.

The transaction will be finalised once it has approval from authorities and has met the required conditions.

 

Massmart in talks to acquire OneCart

Source: IOL

Massmart has announced that it is in negotiations to acquire a controlling stake in OneCart. The company said the negotiations were at an advanced stage. It said the acquisition was in line with its strategic intent to accelerate growth in e-commerce.

The group hopes to conclude discussions in the coming weeks.

OneCart is a South African grocery delivery service that was founded in 2016.

Massmart Group chief executive officer, Mitch Slape said: “The proposed acquisition is consistent with Massmart’s strategy to invest in and accelerate eCommerce growth, particularly in the fast-growing on-demand delivery segment. A key objective going forward would be to invest in aggressively growing and fully supporting OneCart’s existing independent retailer marketplace model that enables consumers to order from multiple retailers via a single platform.”

In March, Massmart outlined the group’s immediate eCommerce priorities including to:

• Establish a unified group-wide eCommerce capability under the leadership of Sylvester John who has been seconded by Walmart to fulfil the role of Massmart Group eCommerce vice-president.

• Revamp the makro.co.za, game.co.za and builders.co.za online user interfaces, including key functionalities like search, to provide a more seamless and intuitive customer experience.

• Develop new transactional and value-adding mobile-first digital solutions that cater to different customer occasions, journeys, and segments, including participation as anchor retail tenant on the Vodapay Super App.

• Strengthen and expand order fulfilment capabilities such as on-demand and same-day order fulfilment, “ship to home” capability from Distribution Centres to supplement store fulfilment capacity, and improving the click-and-collect customer experience in stores.

Group vice-president for eCommerce Sylvester John said: “It’s clear that we have the brand recognition, geographical presence, merchandise assortment, procurement scale, and primary logistics capability to be an even more successful eCommerce player.

“In addition to better leveraging these assets, our immediate opportunity is to improve and expand our digital sales platforms and last-mile delivery capability. The successful acquisition of OneCart will go a long way toward achieving this.”

The company said that in 2020, online sales across Massmart increased by 58.6%, the number of unique eCommerce customers grew by 73% and click-and-collect orders increased by 69.5%. eCommerce contributed 1.8% of total sales, representing a significant increase over the previous year.

OneCart has achieved year-on-year growth of 400% since its inception.

Slape said: “Successful closure of the proposed OneCart transaction will contribute immeasurably to our centralised eCommerce capability that has specifically been established to concentrate scarce expertise, including Walmartpracticence, in a way that will accelerate the adoption of eCommerce best practise at Massmart.”

 

Game is Massmart’s biggest problem

Source: Knowledia

A trading update for the first half of the year from Massmart on Friday spooked investors who had been banking on a stronger recovery. The share closed over 9% lower at R54.95, having traded as much as down 11% on the day.

While the headline number seems “satisfactory” – sales are up 4.4% ­– it must be remembered that the group is comparing sales this year to a period last year during which the country was practically shut down for a month, with the level-5 hard lockdown from 27 March through the rest of April. In May, some restrictions were eased, and in June the economy was opened further. Compare the first half of this year to 2019 and sales have dropped 5.7% across the group.

Makro’s R13.7-billion in sales for the 26 weeks are 2.2% higher than the comparable period in 2019. At Builders, sales of R7.2-billion are 7.5% better. The real horror show is in the group’s cash and carry and Cambridge food businesses as well as Game.

Sales at Game were 7.6% lower than the same period last year, with comparable stores sales being 6.9% lower

Total sales in the cash and carry and Cambridge units is down by 9.8%, or R1.4-billion, when compared to the first half of 2019. This decline was led by Cambridge, which the group has been trying to sell for the last six months. Sales in this business, ranked eighth in food retail in the country, are 9.4% lower than last year.

A far bigger problem, however, looms at Game.

Massmart says sales at Game were “7.6% lower than the same period last year, with comparable stores sales being 6.9% lower” — this despite half the period being impacted by lockdown last year. (In South Africa, the decline was 4.6%.)

Compare sales at Game to the first half of 2019 (excluding the impact of lockdown), and although there is some impact of “lost” sales due to the closure of DionWired, these are down 19.1%! Game and Dion Wired were part of Massmart’s former Massdiscounters division.

The R6-billion question (the current value of its 51% stake) is how long Walmart will continue to waste management time – and money – trying to fix Massmart.

Massmart CEO Mitchell Slape has already done the easy work: shutting and selling underperforming stores, fixing retail basics in Game, stripping out large chunks of head office costs (by outsourcing central functions to Walmart suppliers) and securing a R4-billion (soft) loan from Walmart to bolster its balance sheet during a Covid-19 impacted year last year.

The rampant looting and destruction in July may have been the final straw.

Massmart loses R1bn tax refund appeal

By Dineo Faku for IOL

Massmart has suffered yet another blow after the Supreme Court of Appeal ruled that the retailer could not claim nearly R1-billion worth of losses from the taxman for a share incentive scheme implemented 20 years ago for senior managers.

The Supreme Court of Appeal dismissed Massmart’s appeal of a court decision that gave the SA Revenue Service (Sars) a right to disallow R945 million in capital losses claimed by the group.

In his judgment, the appeal Judge Visvanathan Ponnan, said that the unpaid loans plainly constituted an asset in the hands of Massmart.

“There could thus be no loss to speak of. Instead, what Massmart purported to do was to account for the trust’s losses in its books,” Judge Ponnan said. “This despite the fact that at the outset they had received legal advice from Mr Lewis that they could not, by arrangement between them and the trust, change the incidence of capital gains or losses.”

The court action stems from the decision by Sars to block the capital losses claimed by Massmart after the company could not identify the asset disposed of which gave rise to the capital loss.

Massmart, the owners of Game, Makro and Builders Warehouse brands, approached the SCA after the Tax Court of South Africa dismissed the

company’s determination that it had suffered R954m capital losses during its 2007 to 2013 years of assessment by virtue of its dealings with the trust.

In 2000, Massmart resolved to adopt a share incentive scheme for its key management personnel, conducted through the Massmart Holdings Limited Employee Share Trust.

On June 12, 2000, the Trust Deed for the trust was adopted by Massmart, and the first trustees of the trust were an accountant, Mark Franklin, and Stephen Lewis, an attorney at Edward

Nathan and Friedland Incorporated.

Judge Ponnan said in his judgment that Massmart’s witnesses Franklin, former chief executive, Guy Hayward, the assistant to the share trust administrator, Sena Farquhar, had not helped the company’s case.

“Far from supporting Massmart’s case, the evidence of the three witnesses appears to have bolstered Sars’s contention that the notion that the so-called right constituted an asset, is illusory and an ex post facto reconstruction to establish a basis by Massmart for a claim for capital gains,” said Judge Ponnan.

For instance, during his testimony, when asked what was the basis upon which capital losses were claimed previously by Massmart before the appeal, Hayward said: “I have, M’Lord, I have no recollection, I’m not clear on that … I do not know that personally.”

While Franklin accepted that the funds that Massmart had advanced to the trust were recorded as loans, he testified, however, that there was never any intention that the loans would be repaid.

He could also not explain why the loans were recorded as unpaid loans in the financial statements of the trust and the balances were carried forward to each succeeding year.

Franklin had said it was for accounting purposes that funds advanced to the trust were described as loans because there was never any intention that it should be repaid.

“Well, it could have been described otherwise, but it was not a loan in the sense that a loan means that the trust was required to repay it, because the trust had no funds. “So it would never have been able to repay it,” Franklin said. “So in that respect the term loan is probably misleading.”

 

By Ntando Thukwana for Business Insider SA

Walmart-owned retailer Massmart has big plans for mobile shopping in South Africa, including its own new apps and becoming an “anchor tenant” on Vodacom’s new so-called super app.

The app, built in partnership with the digital payment group Alipay (which is part of the Chinese behemoth Alibaba), will offer mobile shopping and music streaming as well as a large range of services, including the ability to pay bills, send money to friends, and even borrow money for a small business or buy insurance via your phone. The super app is due to be launched by mid-2021.

Vodacom’s 44 million subscribers will initially be able to buy directly from Makro and Builders Warehouse on the app, and Game will later be added.

Richard Inskip, Massmart’s chief operating office, said that the Vodacom partnership will widen its customer base.

“It gives us access to a lot more customers than we currently have. We believe that we would get a lot more younger, tech-savvy customers to come to us (via the Vodacom app),” said Inskip.

He says that Massmart wanted to effectively become an anchor tenant on the Vodacom app, before its competitors.

“We would want that in advance of our competitors like Takealot. We believe that we’d be better positioned to serve the customers,” he said.

Massmart also recently partnered with OneCart and UberEats to expand its reach, and plans to introduce its own shopping apps.

Driving the retailer’s digital plans is Sylvester John, who joined Massmart last year. He was previously Walmart North America’s vice president for so-called “last mile delivery” – products’ journey from the warehouse shelf to customer doorstep.

“We are expanding into mobile apps and over time (will adopt) a mobile-first strategy. A large percentage of our current customers access our site by phone,” John said.

To improve its “last mile” operations, the company is partnering with global logistics platform Far Eye, who will be “working to centralise all customer deliveries onto a single sophisticated platform”.

Massmart estimates that it is now the second-biggest ecommerce player in South Africa – after Takealot.

Its online sales breached R1 billion for the first time last year. Builders’ Warehouse’s online sales more than doubled, while Game (78%) and Makro (42%) also saw strong growth.

However, this could not save the rest of the group, and overall sales declined by almost 8% to R86.5 billion over the past year.

While the company says its online operations are profitable, as a group, Massmart suffered a headline loss of R924 million last year – albeit smaller than 2019’s loss of almost R1.2 billion.

This beat expectations and, along with its new plans to sell some of its brands, sent the company’s share price rocketing by 20% on Monday.

Massmart was last trading at R51, almost at its best level over the past year – and 190% higher than its low point of below R19 in July 2020.

 

Struggling Massmart disposes of more assets

By Dineo Faku for IOL

Massmart shares surged 20.76 percent at the JSE yesterday to close at R54.10 as the market welcomed the proposed sale of its non-core Masscash, Cambridge Food and Rhino stores as well as the review of its footprint outside the Southern Africa Development Community (SADC) as it focuses on investment in core and high returning assets.

Chief executive Mitch Slape said the group would review its operations outside SADC in the second quarter.

Slape said the group had appointed Barclays to facilitate the disposal of the Cambridge Food, Rhino and Massfresh comprising The Fruitspot and a meat processing facility assets.

“We are going to be divesting our Masscash, Cambridge and Rhino business largely because these are not core assets to Massmart, and we see no clear pathway to market leadership with these businesses,” said Slape, adding that the SADC stores had a mixed performance and had added significantly to the complexity of the Massmart business.

“These decisions are indicative of a strategic shift to concentrate on areas of market leadership, areas we believe we have the strength against our competitors.”

Massmart unveiled plans to accelerate its e-commerce strategy leveraging the experience of parent company Walmart.

It announced a focus on the growth of its DIY category, primarily Builders Warehouse, its wholesale business, and the revitalisation of its general merchandise business.

However, due to Covid-19 pandemic restrictions mainly on liquor, sales during the 52 weeks ended

December 27, 2020, fell to R86.5 billion representing a decline of 7.7 percent, with a 7.5 percent fall in comparable store sales in line with expectations.

Investment Analyst at Sanlam Private Wealth, Renier de Bruyn, said grocery retailers had been hard hit by the liquor restrictions, which negatively impacted the results, while the increased spend on home improvement projects by retail customers was evident in the healthy rise of operating profit at Builders.

“Some underlying progress can be seen in the new management team’s turnaround plan announced at the start of 2020 in terms of improved inventory and margin management and restructured operations,” De Bruyn said.

“There also seems to be better support from their parent Walmart in a number of areas.”

Trading profit was up 5.5 percent at R1.172bn from R1.11bn in 2019. The group reported a net loss of R1.8bn from R1.3bn during the same period in 2019, while its headline loss narrowed to R900 million compared to a headline loss of R1.2bn during the same period in 2019.

Euromonitor consultant Christele Chokossa said despite the 5.5 percent increase in trading profit due to lower operating costs through lease renegotiation, recruitment freeze, and closure of DionWired stores, Massmart’s profit before interest and taxes declined by 119.5 percent, while net loss for the period increased by 35 percent.

“Massmart likely lost shares in food retailing due to lower demand from the hospitality industry, as well as the closure of some stores due to Covid-19. Besides, Game’s performance was poor when considering its overall industry performance,” Chokossa said.

The review of the stores outside SADC builds on the turn-around plan announced last year that has seen the revamping of Game stores, and resulted in the closure of 23 DionWired stores and underperforming Masscash stores. Last month Massmart also announced the decision to divest an additional 14 Cash & Carry stores following a more comprehensive strategic review.

 

Source: News24

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.

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