Massmart reveals massive store expansion plans for Makro and Builder’s Warehouse

Retailer Massmart, which owns Makro and Game in South Africa, said it aims to grow its store footprint over the next five years to generate additional sales. It follows its latest financial performance showing prolonged losses over the past year.

On Monday March 7, the group announced a 65% drop in its overall earnings per share for the 52 weeks ending December 2021, a loss of 705.5 cents per share, while the group announced a loss for the year of R2. 2 billion, compared to 1.75 billion rand previously.

Massmart said total group sales for the 52 weeks ended December 26, 2021 of R84.9 billion represented a 1.9% decline from the same period in 2020, while comparable store sales declined. increased by 1.7% over the same period. The group again waived the right to declare a dividend for the period.

It said it generated a trading profit of R195.4 million, despite the severe impact of civil unrest. “This was achieved through partial offsetting of civil unrest losses from insurance proceeds as well as a sustained 1.2% decline in expenses.”

Massmart said its performance was affected by two waves of Covid-19 and the resulting lockdowns, as well as civil unrest.

“Black November and holiday season trade was also impacted by inventory availability, resulting from the destruction of two distribution centers (DCs) during the July unrest, including our main import processing centre, and vendor stock-outs resulting from unrest in the electronics goods and appliances supply chain.

The group said it lost around R4.5 billion in sales due to civil unrest and the Covid-19 ban on alcohol sales.

Civil unrest in July led to the closure of 43 stores which suffered varying levels of damage, resulting in lost sales of R2.7 billion. A 110-day Covid-19 ban on the liquor trade resulted in lost sales of R1.8 billion. “We estimate the combined lost sales margin associated with these events at R666.1 million,” he said.

“Reduced inventory availability during Black November and the holiday trading season, due to the loss of two distribution centers during the unrest, including our main import processing center, as well as stock-outs suppliers resulting from disruptions from unrest in the electronics goods and home appliance supply chains, was not factored into the aforementioned lost sales estimate.

Massmart CEO Mitch Slape said, “Our sales performance was challenged by external events that significantly impacted our high-contribution general merchandise and liquor categories. This has not, however, derailed our turnaround momentum, the positive impact of which is becoming evident on the performance of our ongoing operations.

Future growth

Turnaround initiatives aimed at simplifying and concentrating activities are mostly comprehensive and include; centralize support functions, outsource financial transaction processing, reset cost base, integrate supply chain network, merge wholesale business, exit non-core businesses and markets, and strengthen Game, Massmart said .

Game reported a trading loss before interest and tax of R1.03 billion, compared to an earlier loss of R532.5 million, while Builders reported a trading profit of R1.18 billion.

“We have intensified the pivot to grow our core general merchandise, home improvement and food and alcohol wholesale offerings. This includes investments in e-commerce and increased capital allocation to expand and reshaping the store footprint of our high yielding Makro and Builder formats,” the group said.

According to Massmart, it is the second largest traffic generator on retail websites, in which it reported achieving a 56% increase in e-commerce gross merchandise value (GMV).

“This track record, coupled with our buying scale and nationwide store presence, supported by a sophisticated network of distribution centers, presents a clear opportunity to become the market leader in business-to-business and consumer (B2B+) e-commerce. VS).

The group noted that it had secured access to Walmart’s global e-commerce technology stack and approved a three-year e-commerce investment plan that is heavily focused on creating an online shopping experience. intuitive mobile-centric. “Our goal is to achieve GMV growth of 50% to 65% each year for five years.”

Over the next five years, Massmart said untapped market opportunities will result in a 50% increase in the Builder store footprint in South Africa, driving potential sales to R2.4 billion, up from 1 .4 billion rand previously.

Makro will see a 25% increase in its store network, increasing potential sales from R2 billion to R7 billion. “Existing stores in both formats will also benefit from targeted store renovation programs,” he said.

“Our growth prospects are compelling and are based on a realistic market assessment that highlights our core strengths. We are rapidly deploying financial and human resources, with Walmart’s e-commerce technology assistance, to take full advantage of the market opportunities available to us,” Slape said.

A total of 72% of Massmart’s Capex budget for 2022 has been allocated to e-commerce investment and new Builders and Makro store development and renovation projects, he said.

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