Covid-19 lockdown sees double-digit sales slide at Massmart

Retail and wholesale giant Massmart reported an 11.9% slide in total sales (R28.2 billion) for the 19 weeks ending 10 May 2020 in a trading update on the JSE on Monday, due largely to the Covid-19 lockdown and trade restrictions in South Africa – its largest market.

The group noted that the Covid-19 lockdown had a “significant impact” on normal trading, which meant a considerable share of its goods, including general merchandise, home improvement products and liquor could not be sold during the five-week level 5 lockdown.

“Sales from our South African stores amounted to R25.3 billion, 13.1% lower than last year, with comparable store sales decreasing by 13.2%. Total sales from our ex-South Africa stores amounted to R2.9 billion, 1.3% higher than last year, with comparable stores decreasing by 0.3%,” it said.

Massmart did not mention the closer of its DionWired stores in its latest Sens statement, however, closure of the chain is likely to have also contributed to a decline in sales.

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In a previous trading update on March 30, the group noted that total sales had increased 1.3% for the 13-week period ended 29 March 2020 compared to the prior year, while comparable store sales increasing by 0.9% over the same period.

This showed that the group saw a peak in sales as South Africans embarked on panic buying in the latter two weeks of March, after state of disaster measures and plans for a lockdown were announced. However, the trade restrictions following the lockdown has negated the short peak in sales, with the double-digit decline in sales for the period to May 10.

While some of these trade restrictions have been eased under level 4 of the lockdown, which came into effect as of May 1, liquor and cigarette sales continue to be banned.

“Massmart was unable to trade in the majority of general merchandise, home improvement and liquor products for most of April. These untradeable product categories represent a significant portion of our overall merchandise offering,” the group pointed out in its latest trading update.

“The contribution of these product categories to sales in the 2019 financial year was as follows: General Merchandise (26%), Liquor (15%) and Home Improvement (15%). Given the high level of contribution of these categories to total sales, April Covid-19 sales were significantly lower than would be the case under normal trading conditions,” it added.

Meanwhile, Massmart reiterated that the group has a strong balance sheet. It noted that based on cashflow forecasts, the group “has sufficient cash facilities” and resources to meet its obligations.

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“The intensified pressure resulting from extended Covid-19 trading restrictions increased the daily focus on liquidity and cash flow management,” it said.

“In line with good financial practice, Massmart continued to focus on prudent cash flow management and initiatives to improve cash generation performance. These included initiatives to negotiate rental reductions and improved, mutually beneficial terms with strategic suppliers,” the group added.

Massmart said that it “met all payment obligations” throughout the lockdown period and has continued to pay all employees in full. “We will continue to proactively work with all suppliers and stakeholders to manage our cash position going forward.”