Massmart says foot traffic remains constrained with the impact of Covid denting consumer confidence

Massmart Holdings, the operator of Makro and Game stores, said in a trading update on Friday (13 August) that rising unemployment, along with extended levels of lockdowns and curfews, has adversely impacted consumer confidence.

For the 26-week period ended 27 June 2021, Massmart’s total sales amounted to R41.3 billion, representing an increase of 4.4% on the same period last year, with comparable-store sales increasing by 4.8%.

Various levels of trading restrictions impacted sales over the same period in 2020 as a result of the Covid-19 level 5, 4 and 3 lockdown restrictions effective from 27 March 2020 until
reporting date.

Total sales from South African stores for the 26-week period increased by 5.9%, while comparable stores sales increased by 6.6%.

In Makro, total sales of R13.7 billion increased by 13.5% over the prior year, while total sales in our Cash & Carry business of R9.3 billion were 2.3% lower than the same period last year.

Food sales remained under pressure, decreasing by 2.9% in Makro and 8.0% in Cash & Carry due to ongoing lower activity in the corporate, hospitality, restaurant and catering industries, the group said.

“However, liquor and general merchandise sales have performed well. Total liquor sales in our combined Wholesale business are 39.6% higher than last year, which was impacted by the ban on liquor sales in place in April and May 2020.”

Massmart said that foot traffic in most super and regional malls and retail centres remain constrained, as consumers prefer to avoid crowded indoor spaces in light of Covid-19 infection concerns.

“Consequently, given its relatively high presence in these locations, Game’s total sales of R7.6 billion was 7.6% lower than the same period last year, with comparable stores sales being 6.9% lower.”

Sales from South African stores decreased by 4.6%, with comparable stores decreasing by 3.7%.

Trading update

“A sluggish economic recovery in South Africa, ongoing concerns around Covid-19 infections and resulting lockdowns and restrictions on the sale of goods and movement of people, have impacted on trading performance,” the group said.

“While sales have recovered compared to the same period last year, we continue to see sales pressures persist in Game, Cambridge and Wholesale food and liquor. Group trading profit, from continued operations, is expected to be between 751% and 771% better than the trading profit of R92 million reported in the same period last year.”

It said that earnings are expected to be adversely affected by the impairment of the carrying value of assets in Game of approximately R570 million and retrenchment costs relating to the reorganisation of certain home office support functions.

In addition, interest costs are expected to improve on the prior year due to improved levels of average borrowings. Massmart said that the sales process of the Cambridge and Massfresh businesses continues, and as such, the results of Cambridge and Massfresh are treated as discontinued operations.

Massmart expects that headline earnings per share on a continuing basis, which excludes the Cambridge, Rhino, and Massfresh businesses as discontinued operations will improve by 51.6% – 61.6%, to a loss of 146.8 cents per share and 185 cents per share.

HEPS for the total business is expected to improve by 35.4% to 45.4%, representing a loss per share of 273.7 cents to 323.8 cents.

Massmart’s financial results for the 26 weeks to June 2021 will be published on 27 August 2021.

Unrest impact

Massmart noted that a total of 43 stores and two distributions centres were impacted by the recent civil unrest and looting events in the provinces of KwaZulu- Natal and Gauteng of South Africa. It said that several additional stores have been closed for a short period of time in light of safety concerns.

Of the 43 impacted stores, operations in 8 stores have already restarted. Except for those stores that sustained structural damage, most stores should be open for business in the coming weeks.

“In addition, we have successfully shifted replenishment capabilities into our other distribution facilities to ensure continuity in the replenishment cycle for all of our stores, despite the impact of the two affected distribution centres,” it said.

Massmart said that insurance cover is in place but will not fully offset the losses suffered.

Read: Massmart sales update points to Makro recovery – despite R770 million liquor hit

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Massmart says foot traffic remains constrained with the impact of Covid denting consumer confidence