Massmart will be restructuring its business in South Africa amid an expected full year loss of over R1.2 billion, and a massive decline in trading profit.<\/p>\n
The group published a trading update for the period ending 29 December 2019, warning of the staggering full-year loss due to tough trading conditions in South Africa.<\/p>\n
The company expects to report headline loss of between R1.13 billion and R1.22 billion for the year, down from headline earnings of R901.2 million in 2018 (as much as 236% lower).<\/p>\n
Headline losses per share are expected between 522 cents and 563 cents, down from HEPS of 416.5 cents before.<\/p>\n
Trading profit for the full year, before the impact of IFRS 16, is expected to be 73.0% to 83.0% lower than the prior-year trading profit of R2,068.9 million.<\/p>\n
Including the impact of IFRS 16, trading profit is expected to be 40% to 50% lower.<\/p>\n
The net loss, it said, is projected at between R1.2 billion and R1.4 billion.<\/p>\n
South African struggles<\/strong><\/p>\n Massmart said that the second half of 2019 was characterised by tough trading conditions, which included load shedding and consumers under pressure due to the creeping economy.<\/p>\n “Economic growth contracted in Q3 2019, whilst Q4 2019 offered little relief,” it said.<\/p>\n In addition to the material impact of trading disruptions and customer inconvenience caused by aggressive load-shedding in early December, consumers continued to prioritise spending on non-durables over spending on durable goods, it said.<\/p>\n During the course of H2 2019, food sales increased by 3.3%, liquor sales increased by 0.4% while general merchandise sales – the group’s biggest and largest margin category – decreased by 2.6%. Home improvement sales increased by 1.9%.<\/p>\n The group said it delivered a very strong Black Friday sales performance – unfortunately, this did not carry-over into the festive period, as sales growth in Q4 2019 was 0.5% as compared to the same period in 2018.<\/p>\n Massdiscounters – which includes Dion Wired and Game – saw total sales for the 52 weeks of R19.8 billion, up only 0.3% up on last year.<\/p>\n This was most notably impacted by lower consumer spending on durable goods, the group said, with comparable stores sales contracting by 2.1%.<\/p>\n Durable goods include appliances, tools, electronics and similar products.<\/p>\n Overall sales growth for H2 2019 was 0.9% (down from 5.5% in H1 2019) with comparable stores sales contracting by 0.3%.<\/p>\n