South Africa-based retail group Massmart Holdings said on Monday (March 7) that it was still feeling the severe impact of a July 2021 civil unrest in its core market that led to the closure of 43 stores and resulted in lost sales of 2.7 billion rand ($175.8 million).
According to the 2021 earnings report, the retailer lost an additional 1.8 billion ($117 million) in revenue due to a 110-day Covid-19 prohibition on liquor sales that further hurt the company’s overall 2021 sales performance.
Commenting on the results, Massmart CEO Mitch Slape said, “Our sales performance has been challenged by external events [….]. It has not however derailed our turnaround momentum, the positive impact of which is becoming evident in our Continuing Operations performance.”
On the upside, a decrease in expenses, as well as insurance proceeds it received from civil unrest-related damage to inventory and assets, led to a 1.7% growth in total Group sales to 12.3 billion rand (about $800 million), while continuing operations sales increased by 3.6% during the 2021 trading year.
To offset the heavy losses, the Johannesburg Stock Exchange (JSE)-listed firm which is majority-owned by U.S. retail giant Walmart, is in the process of divesting close to 30 stores – 14 in East and West Africa and 15 in South Africa – under one of its brands, Game.
The company is also waiting on South Africa’s competition authority to approve the sale of other brands, including Cambridge Food, Rhino and Massfresh to Shoprite that was announced in August last year.
Operating 408 retail and wholesale stores in 13 sub-Saharan countries under popular local brands including Makro, Builder’s Warehouse, Game, Jumbo and Shield, Massmart is one of the biggest retail chains on the African continent and the leading general merchandise retailer in South Africa.
eCommerce Holds Promise
Despite the steep revenue loss, eCommerce sales jumped by 47% last year, while eCommerce sales participation increased from 1.8% to 2.2%, highlighting a huge growth opportunity for the discount retailer aiming to become the business-to-business (B2B) and business-to-consumer (B2C) eCommerce market leader in the southern Africa nation.
To accelerate those plans, the JSE-listed company said it plans to leverage Walmart’s global eCommerce technology stack and has approved a three-year eCommerce investment plan that, among other things, will be mainly geared toward creating a seamless, mobile-first online shopping experience for consumers.
“We are rapidly deploying financial and people resources, with eCommerce technological assistance from Walmart, to take full advantage of the market opportunities before us,” Slape said in the report.
In a move to further boost online sales, the South African firm recently acquired OneCart, a consumer goods marketplace and logistics platform that works with retailers to offer customers a rapid and flexible home delivery service
And last month, the retail group announced a collaboration with Mastercard to help small, medium-sized and micro-enterprises (SMMEs) in South Africa find digital commerce solutions as they recover from the effects of the pandemic.
“The COVID-related lockdown in 2021 and subsequent unrest experienced in July last year had a devastating effect on small businesses,” Varsha Dayaram, senior vice president for Massmart Financial Services, said in the announcement.
“Informal traders suffered enumerable losses during this time, which was exacerbated by the destruction of their POS infrastructure, thus depriving them of offering card payments as tender type at a time when card acceptance in informal communities became more pervasive as a secure and convenient alternative to cash,” she said.
As part of the deal, SMMEs can purchase electronic Point of Sale (POS) or Mobile POS devices at discounted prices at any Massmart retail outlet across the region.