Massmart says it will take under-performing Game back to its origins
MASSMART has announced a restructuring of its under-performing Game portfolio in order to return it to profitability and negotiations with retail property landlords to reduce costs.
Massmart, whose brands also include Makro and Builders Warehouse, said Game would be repositioned to go back to its origins by replacing the poorly performing fresh food division with basic apparel, including basic shirts and ties.
Chief executive Mitchell Slape told journalists in Johannesburg yesterday that the group was implementing Walmart-style measures to drive revenues.
“We have decided to get out of frozen and fresh foods at Game; we will begin to pull that department out of stores,” said Slape. “Basic apparel is going to take that space.”
Slape, a Walmart veteran who previously worked in India and Mexico, was unpacking the group’s turnaround plan modelled to focus on the needs of its customers. He replaced Guy Hayward last September.
Slape said there were no plans to close Game stores, given the strong brand and value proposition.
“Game is a brand that is highly recognised by customers,” he said. “It has value in it. Frankly speaking, our level of execution has not been good at all. I am a believer that if we begin to fix some of the fundamentals of execution we are going to get an upside on sales.”
Slape said the group was also talking to landlords about its leases.
He said rental escalations beyond inflation were harming the retail industry.
“Escalations in these markets are ridiculous, there is nothing to justify that. They are far north of inflation and we will begin to change that. You’ve got escalation in this market in the 7 and 8 percent range. There is no way that the retail sector can survive with these kinds of escalations. I think it is time for the market to be reasonable about them,” said Slape.
Last year, Massmart said it would prioritise the profitability of Massdiscounters and Masscash, drive structurally lower operating costs and invest in Online capabilities.
Slape said the turnaround plan would also see the merger of the Masscash and Masswarehouse businesses.
“Together these businesses combined are to create a R15 billion wholesale powerhouse in my opinion,” saying that the wholesale business had untapped opportunities.
Slape said the reason Makro worked was that retail customers enjoyed the benefits of wholesale shopping.
“We are not going to make changes to Makro. Makro will remain Makro, but leveraging that wholesale scale-out of Makro is incredibly important for us,” he said.
The Game restructuring comes after the company announced that it was entering into a consultation process with organised labour for input on its plan to close 34 loss-making DionWired stores, which will likely result in the loss of 1 440 jobs.
Slape said Massmart would also centralise its supply chain by consolidating distribution centres down to seven from the current 15.
Massmart shares declined 0.44 percent on the JSE yesterday to close at R52.