Massmart to close more stores as it prepares for another loss


Massmart to close more stores as it prepares for another loss

Published Date: 2021-02-22 | Source: Stephen Gunnion | Author: Stephen Gunnion

Massmart to close more stores as it prepares for another loss

The retail and wholesale group plans to close an additional 14 Masscash stores as it tries to return the division to profitability.

Massmart will report a bigger full-year loss after booking impairment and retrenchment costs in a year that it lost billions of rands in sales due to Covid-19. However, its headline loss for 2020 is expected to narrow. It also plans to close more stores in an attempt to return its Masscash division to profitability.

In an operational update and trading statement, the retail and wholesale group said sales fell 7.7% to R86.5 billion over the 52 weeks to 27 December. The decline in the final quarter of the year was less severe than previous quarters but was still impacted by softer sales over the Black Friday period in November and fewer customers to its stores in regional malls. Like other retailers, Home Improvement sales did well as consumers continued to spend on their homes.

Massmart said some of the R6 billion it lost in sales, including extended restrictions on normal trading of liquor, was offset by rent relief from its landlords and benefits received from the government through the Temporary Employment Relief scheme.

For the year, it expects its headline loss to narrow by 16.7% to 21.7% from 2019's R1.15 billion loss. Its net loss will be 30.9% to 35.9% wider than the R1.31 billion loss of a year earlier.

The group recorded goodwill impairment losses on its Cambridge and Fruitspot businesses as a result of changes in market conditions, as well an impairment loss on its Meat Production Facility and some store level assets. Total impairment losses for the year came to about R798 million. After closing its Dion Wired and some Masscash stores and reorganising the operating model for its Game chain, it incurred total retrenchment costs of about R132 million.

On top of the Dion-Wired and 11 underperforming Masscash stores it said it planned to close a year ago, Massmart said it had decided to divest its interest in an additional 14 Masscash Cash and Carry stores to help optimise its store portfolio as it consolidates its Makro and Masscash wholesale store base into its new Massmart Wholesale Business Unit. It said it had found a buyer for 8 of the 11 original Masscash stores it was closing and the Competition Tribunal had approved the deal with a condition linked to employment security. The sale to Devland Cash and Carry will save at least 640 jobs. The company said it was still contemplating the potential sale of the remaining 3 stores, while it was about to close a deal to sell its Qwa Qwa Masscash store too.

Massmart's full-year results are scheduled for release on 8 March. Its shares closed 1.2% higher at R49.60 on Friday.

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