Massmart says Covid-19 restrictions cost the group R6 billion in lost sales

Massmart, the owner of brands including Game, Makro, Builder’s Warehouse on Friday (19 February) provided an operational update on sales for the 52 weeks ended 27 December 2020, showing total sales lost for the full year due to Covid-19 restrictions to be at least R6.0 billion when compared to 2019.

The group previously announced that full year sales of R86.5 billion was 7.7% lower than 2019, with comparable stores sales being 7.5% lower.

Fourth quarter sales, which contracted by 4.1% over the previous year, represented an improvement on the H2 sales trajectory – total H2 2020 sales decreased by 5.9% over the previous year, it said.

The group said in a trading statement that it expects to report a headline loss per share of 416.2 and 442.6 cents per share, an improvement on the 529.0 cents per share loss previously.

Fourth quarter sales were impacted by softer sales over the Black Friday period, in addition to lower foot traffic, especially in regional malls, Massmart said.

The company’s extension of Black Friday promotions throughout the month of November mitigated some of this impact, with total sales for November being 5.0% lower than the previous year.

“We are encouraged by strong sales growth relating to Home Improvement, which grew by 8.1% over the course of H2 2020, showing strong growth in the fourth quarter,” it said.

Massmart said that some of the impact of lost sales were offset by rent relief received from our landlords, and benefits received from Government through the Temporary Employment Relief Scheme (TERS) relief provided.

It said that a combination of the improvement in gross margin and strong expense management assisted to offset the impact of lost sales relating to Covid-19 restrictions. As a result, the group estimates that trading profit will be between 3% and 8% better than last year’s trading profit of R1.1 billion.

Massmart incurred total retrenchment costs of approximately R132 million relating to the closure of Dion Wired, the previously announced closure of 11 Masscash stores, and the reorganisation of the Game store-level operating model.

As a result of changes in market conditions, the group said it also recorded goodwill impairment losses of approximately R798 million relating to the Cambridge and Fruitspot businesses, and its Meat Production Facility. Certain store level assets have also been impaired.

Store closures

In January 2020, Massmart announced its intention to close Dion-Wired and 11 under-performing Masscash stores. It also communicated that it had identified a potential buyer for eight of 11 Masscash stores.

On 16 February 2021, the Competition Tribunal approved the transaction covering those eight stores with a condition linked to employment security, it said.

“The potential sale of the remaining three stores is still being contemplated. Subsequent to the announcement of the aforementioned 11 Masscash stores, a decision was taken
to divest the Qwa Qwa Masscash store.

“A suitable buyer was found for the store and the transaction will close shortly.”

In a further development and following a more comprehensive strategic review, Massmart said it has taken the decision to divest its interest in an additional 14 Masscash Cash and Carry stores.

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Massmart says Covid-19 restrictions cost the group R6 billion in lost sales