Massmart Holdings Limited (Massmart) a South African retailer that own brands such as Makro, Game, Builders Warehouse and CBW and one of the largest distributors of consumer goods in Africa, has published its trading statement and gave the market an update on it future plans.
The group reported sales of amounting to R75.3 billion for the 48 week period ended 28 November 2021, which was 1.3% lower than the same period in 2020.
The group sites that the lower sales were impact by mainly Covid-19 liquor trading restrictions, lost sales from stores damaged during the July unrest in Gauteng and KwaZulu-Natal and unrest related supply chain disruption resulting in insufficient in-stock service levels of certain home electronics and appliances lines.
Massmart gave an update on its turnaround strategy:
- It has now completed its relay of its 114 Game stores.
- Optimising the Game store portfolio by potentially selling off 15 Game stores and divestiture from South Africa Development Community markets.
- The group previously announced the sale of Cambridge Food, Rhino, Massfresh and 14 Cash & Carry Stores to Shoprite this transaction is currently under review by the competition commission.
- With regard to the eCommerce proposition management is quoted as saying “We have now centralised our trading banner website, mobile and market place capabilities into a strong group-wide Center of Excellence underpinned by an e-Commerce investment programme which allocates significant capital and resources into the eCommerce business over the next 3 years. Our investment priority remains to develop improved eCommerce trading platforms, omnichannel sales and on-demand shopping and delivery services.”
Massmart has engaged with its parent company Walmart to restructure and optimise some of balance sheet items mainly debt. Walmart will extend the term of a portion of the R4 billion loan to Massmart. This will involve replacing R2bn (approximately US$125m) of the loan by subscribing for a perpetual fixed rate unsecured note. This note is issued by Massmart Holdings Limited, will have a perpetual tenure, and is treated as equity in terms of IFRS. The note bears interest at 7.25% initially, and includes an interest step up of 225bps on 31 December 2023. The remaining Walmart loan now has a 6-month tenure, which can be extended at the end of each tenure period. The balance of this loan after the subscription for the Perpetual Note above is approximately US$117m and all other terms remain materially unchanged.
