Massmart provides trading update highlighting COVID-19’s impact

Date : 25 February 2021

Jon Wright

Head of Insight - RA EMEA

Walmart-owned, South Africa-based Massmart released a trading update for the 52-week period ending 27 December 2020, noting full year sales fell 7.7% to ZAR86.5 bn (US$5.9 bn). The retailer reported comparable sales contracted by 7.5% in the year, although it had seen an improvement in performance in Q4.

Q4 sales contracted 4.1%

The retailer said sales in its fourth quarter were down 4.1% on 2019’s performance, but this showed an improvement on its overall performance in H2, where sales were down by 5.9%. Massmart saw softer sales during the Black Friday period, despite it extending the promotional event for the whole of November.

Massmart estimates COVID-19’s impact on sales…

Massmart estimated it lost sales worth at least ZAR6.0 bn (US$412.4m) during its full year period due to COVID-19. The company noted some of the lost sales had been ‘offset by rent relief received from our landlords, and benefits received from Government through the Temporary Employment Relief Scheme (TERS)’.

…While reporting an improvement in gross margins

The retailer’s focus on gross margins helped it continue to improve its total margin percentage in H2, sustaining the performance it had seen in H1. The trend had benefited from a change in its sales mix, such as an increase in retail sales at its Builders Warehouse business.

Optimisation of its store base continues

In January 2020, Massmart announced plans to close the Dion-Wired chain and 11 underperforming Masscash stores as it looked to improve its profitability. It has found a buyer for eight of the Masscash stores, which has been subsequently approved by the Competition Tribunal. A further store was identified for sale, which should complete soon. The remaining three stores from the first batch selected by the company remain under consideration.

As part of the on-going process to optimise its store base, announcing its Q4 results, Massmart said it had identified a further 14 Masscash Cash and Carry stores for closure. The company said the divestment of the additional stores was being ‘enabled by the good progress that we have made toward consolidating our Makro and Masscash wholesale store base within the Massmart Wholesale Business Unit’.

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