Massmart, the owner of local brands including Game, Makro, and Builder’s Warehouse, says that the Covid-19 lockdown has had a significant impact on its trading performance.
In a trading update for the 26 week period ended 28 June, 2020, Massmart said that while sales and margins have been lower than the same period last year, increased focus on expense management and cost savings initiatives are bearing fruit, with expense growth expected to be contained to well below inflation.
Massmart said it expects that the loss per share and headline loss per share will be at least 50% worse than last year.
This translates to 191.1 cents per share and 182.4 cents per share, respectively, worse than the loss per share and headline loss per share for the same period last year of 382.2 cents per share, and 364.7 cents per share.
Excluding the impact of the Covid-19 lockdown, “we expect the loss and headline loss would have been slightly better than the same period last year,” it said on Wednesday (17 June 2020).
The group noted that it was unable to trade in the majority of general merchandise categories, home improvement and liquor products for most of the month of April, which had a significant impact on total sales during that month.
Moving to level 4 lockdown from the beginning of May enabled Massmart to gradually start trading in more product categories.
“Most notably, our Builders stores throughout the country were able to recommence sales to the general public. However, restrictions on the sale of liquor and tobacco products remained in place throughout the month of May.
“Missed liquor sales for the months of April and May are estimated to be approximately R2.3 billion based on prior year sales. In line with level 3 lockdown regulations in place from 1 June 2020, Massmart is now able to trade in all product categories with the exception of tobacco and related products,” it said.
Trading hours relating to liquor are however still restricted, with no liquor sales allowed from Friday to Sunday and on public holidays.
Massmart said that for the 19-week period ended 10 May 2020, total sales decreased by 11.9% over the prior year, with comparable store sales decreasing by 12.1% over the same period.
With the easing of the lockdown from level 5 to level 4, pent-up demand for home improvement products drove strong sales at our Builders stores during May, while pent-up demand for general merchandise goods supported better sales performance at Makro and Game as the month progressed.
Consequently, total sales for the 23 weeks ended 7 June 2020 amounted to R34.8 billion, which is 10.3% lower than the prior year, while comparable store sales were 10.5% lower than last year. Sales from our South African stores amounted to R31.3 billion, 11.5% lower than last year, with comparable store sales decreasing by 11.5%.
In spite of the lockdown, Massmart said it has not slowed down the implementation of the turnaround plan announced at the end of January. “If anything, it has accelerated some of the initiatives – most particularly the cost-reset project, group restructure into a Wholesale and Retail business units and the Game turnaround plan,” it said.
Massmart said it will provide a comprehensive update on the progress of the turnaround plan during the interim results presentation in August.
The group said it has continued to meet all payment obligations to suppliers and employees.
“Our focus remains on prudent cash flow management and the implementation of strategies to improve cash generation performance through previously reported key initiatives, including negotiated rental savings, mutually beneficial commercial terms with our vendors, applying for available Tax Incentive relief measures and aggressively pursuing the cost reduction initiatives already outlined in our turnaround plan.”
The group said it secured a R4 billion inter-company loan from Walmart Inc to provide additional headroom in the event of unforeseen circumstances.