Massmart plans to slash stores and staff
INCE CONNECT / 14 JANUARY 2020 - 03.16 / STEPHEN GUNNION
Dion-Wired and some of its Masscash stores will be affected as the retail and wholesale group culls unprofitable units to restore earnings.
Massmart may close dozens of stores and retrench close to 1,500 workers as it tries to restore profitability to its vast chain of supermarkets and discount outlets across the continent.
The retail and wholesale group says it has started a potential store closure consultation process in terms of sections 189 and 189a of the Labour Relations Act (LRA) with unions and other stakeholders. A total of 34 Dion-Wired and Masscash stores and around 1,440 employees are potentially affected by the process, it said.
Section 189 of the LRA permits employers to dismiss workers for operational requirements, including economic and structural needs. Masscash includes its Jumbo Wholesale, Jumbo Shield, Rhino Cash & Carry and Cambridge Food supermarkets. Dion-Wired falls under its Massdiscounters division, which also includes Game.
In the six months to end-June, the group reported falling margins and rising expenses, resulting in a trading loss of R1.4 million. Apart from a tough trading environment, it blamed a number of internal missteps that had led to a "fixable lapses" within the business, including insufficiently robust trading disciplines, negative inventory adjustments and delayed implementation of the SAP IT solution at Game, and inventory management and ad hoc collections lapses at Masscash. Massdiscounters was the worst performing division, with a R396 million trading loss, while Masscash reported a trading loss of R190 million.
Walmart veteran Mitchell Slape took over as CEO last September in the midst of the weakening performance. Walmart paid $2.3 billion for a 51% stake in Massmart in 2011. Its market capitalisation is now about R11.4, valuing Walmart's stake at about $400 million or R5.8 billion at current exchange rates.
Last month, Slape said he was working with management on a turnaround plan for the group that would include revitalising the Game Customer Value Proposition.
Retailers are expected to update the market on their festive season sales in the next couple of weeks.
Massmart's shares rose 5.8% to R51.64 yesterday.
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