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South Africa’s Massmart Warns of Bigger Half-Year Losses due to Lockdown

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Luis Monzon
Luis Monzon
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Massmart, a South African super-retailer and owner of Game stores, says it is expecting its half-year loss to widen at least 50% because of a substantial hit to its sales from the nationwide coronavirus lockdown.

Majority owned by American retailer Walmart, the company was already struggling as consumer finances have continued to strain in South Africa. Massmart reported its first trading loss in two decades in August last year.

The company says that the nine-week-long strict lockdown this year cost it R4.6 billion ($267.08 million) worth of sales, pushing total sales 10.3% lower in the 23 weeks ended June 7 despite some pent-up demand as stores reopened.

Reuters writes that the company’s headline loss per share for the 26 weeks to June 28 would likely be at least 182.4 cents wider than the year-earlier loss of 364.7 cents, it says, with operating costs also rising as it spent R50 million on safety protocols.

“Massmart’s balance sheet remains strong and … the Massmart Group has sufficient cash facilities and resources to meet its obligations,” it says in a trading statement, adding it had secured an R4 billion loan from Walmart.

Massmart’s downward spiral continues

Some of the turnaround strategies Massmart announced earlier this year have been recently accelerated by the impact of the virus.

Turnaround plans included the slashing of costs and restructuring its stores into wholesale and retail units, the company says.

In February, Massmart reported that their foot traffic in Game stores had increased 4% – which had led to a sales increase of 1.9% – these numbers are nearly negligible in the face as such overwhelming loss.

Trading profits are down for the group as a whole by 46%, gross margins dropped to 18.9% (19.5% in the previous year), and expenses grew 10.2%. Compared to the overall growth of sales, a total of 3%.

Because of these devastating losses, the company was forced to close its Dion Wired stores in March 2020.

Massmart’s half-year results will be published on August 27.

Edited by Luis Monzon
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