Makro and Game owner makes billion-rand loss

Massmart made a loss of R1.029 billion during the 26 weeks ended 26 June 2022, the company has reported in its interim results.

According to the company’s financial statements, its performance improved by around 4.0% from a R1.073 billion loss compared to the same period in 2021.

However, it also highlighted several other measures showing that Massmart is experiencing significant headwinds.

Massmart reported increased headline losses from continuing operations of 152% — from R358.5 million to R903.5 million.

At the same time, it recorded a 52.4% decrease in trading profit before interest and taxation from its continuing operations.

Continuing operations exclude Cambridge, Rhino, and Massfresh, which Massmart has sold to Shoprite.

It reported a R792.1 million trading profit in 2021. The figure was only R377.3 million for the same period in 2022.

Massmart cited several reasons for the reported loss, including fluctuating exchange rates and a higher opening debt.

“Fluctuations in African currencies resulted in foreign exchange losses of R110.1 million and represented a 25.3% increase from June 2021,” it said.

“A higher opening net debt compared to June 2021, together with increased interest rates, contributed to the 11.2% increase in net interest expenses to R967.5 million.”

It also noted that it had recognised retrenchment and business transformation costs of R205.9 million, a lease settlement cost of R184 million, and an impairment expense of R146.5 million.

The company’s total group sales of R43.1 billion for the period were flat compared to the previous year.

Massmart’s retail sector includes Builders, Game, and formerly Cambridge Food, and Rhino. Its wholesale division comprises Makro, Jumbo Wholesale, Shield, and formerly The Fruitspot.

Sales from continuing operations increased by 1.9% for the 26 weeks ended 26 June 2022, while discontinued operations contributed a R182 million loss.

Massmart also revealed financial results for the 33 weeks ended 14 August 2022, during which its sales reached R52.8 billion — an increase of 2.9%.

The company’s earnings before interest, taxes, depreciation, and amortisation showed a 23.8% decrease from R2.1 billion in 2021 to R1.6 billion this year.

Game’s total sales decreased by 3%, from R7.6 billion to R7.4 billion, while its trading loss improved by 7.2%.

Similarly, Builders’ sales decreased 3.1% to R7.0 billion, while its trading profit decreased significantly from R607.6 million in 2021 to R292.1 million this year.

Makro, Jumbo, and Shield combined showed a sales increase of 5.1%, from R22.6 billion last year to R23.8 million in 2022.

Their trading profit decreased by 12.4%, from R552.8 million in 2021 to R484.3 million this year.

Massmart has been bolstering its online shopping experience to compete with other ecommerce platforms like Takealot.

To that end, Makro recently increased its shareholding of the last-mile delivery service WumDrop.

The retailer purchased a 53% stake in the company in 2017, which it has now increased to 100%.

Outgoing Massmart CEO Mitchell Slape, Makro has the second biggest online presence in South Africa behind Takealot.

“We believe there are a lot of opportunities to continue to grow and take it even further,” Slape added.

Massmart also hired Sylvester John, a former Walmart North America vice president, to head its ecommerce team and help it achieve its goal.

Massmart said it would benefit from John’s expertise and use Walmart’s technology to help boost its ecommerce operations in South Africa.

The full report is embedded below.

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Makro and Game owner makes billion-rand loss