Massmart’s sales are up from last year — but not yet back at pre-pandemic levels

Massmart has reported mixed sales as its 2021 financial year gets under way, with Covid-19 continuing to affect the retail and wholesale group.

Builders Warehouse continues to do well as consumers spend on their homes, boosting home improvement sales. But while South Africans spend more time at home, avoiding shopping malls, this has come at the expense of the group’s chain of Game stores, many of which are located in shopping centres.

Massmart also took a hit from the most recent ban on alcohol sales.

In a sales update for the 19 weeks to 9 May, Massmart reported total sales growth of 8% to R30.5-billion, with sales at comparable stores increasing by 8.4%. The increase all came from its stores in South Africa, with sales from its operations elsewhere in Africa falling by 10% in rand terms and coming in flat in constant currency.

Although an improvement from last year, it was off an extremely soft base as the comparable period included the hard lockdown which started at the end of March 2020 and covered the whole of April, says Zaid Paruk, portfolio manager and analyst at Aeon Investment Management. Sales are down on the same period in 2019. 

While the continued easing of Covid-19-related trading restrictions marked slightly better trading conditions, Massmart said sales had been affected by a ban on liquor trading in January and over the Easter weekend, costing it an estimated R770-million when compared with the same period last year. Its Makro Cash & Carry business was most affected.

Turnover at Makro increased by more than 16% as sales of liquor (when it was allowed) and general merchandise more than compensated for a decline in food sales as a result of ongoing lower activity in the corporate, hospitality, restaurant and catering industry.

Builders grew sales by close to 40% following trading restrictions in April 2020, due to strong demand for paint, home improvement, garden and patio goods.

Sales at Game, which is undergoing a reorganisation, fell by 3.3%. It attributed this to low foot traffic in most super and regional malls as consumers avoided crowded indoor spaces because of Covid-19 infection concerns.

“Builders and Makro continue to sustain other group brands as Game maintains its poor performance due to the reliance on larger shopping mall formats,” Paruk says. 

“The key focus by analysts appears to be on the strategic focus of the group on Game and the future it holds within the larger group in terms of profitability and focus. 

“Could this lead to store closure in the future? If so, this will have an impact on property landlords as Game occupies significant space.”

At Cambridge Food, sales fell 8.4%, which Massmart said indicated that customers in the lower segment of the market were the most affected by the pressures of increased unemployment and lower disposable income.

In March, Massmart said it had appointed banking group Barclays to sell its interest in its food retail outlets, including Cambridge, cash-and-carry chain Rhino and its Massfresh business. DM/BM