Mass­mart shares soar 6% on re­or­gan­i­sa­tion plan to cut costs

Pretoria News - - BR - SANDILE MCHUNU [email protected]

MASS­MART yes­ter­day rose more than 6 per­cent on the JSE yes­ter­day af­ter the re­tail group an­nounced plans to col­lapse its busi­nesses into two di­vi­sions as part of a turn­around strat­egy to cut costs.

The group said Mass­cash, Mass­ware­house, Mass­build and Mass­dis­coun­ters would be re­con­sti­tuted into two busi­ness units of Mass­mart Whole­sale and Mass­mart Re­tail ef­fec­tive to­mor­row.

The re­or­gan­i­sa­tion would see Makro, Jumbo, Cam­bridge Food, Rhino Cash & Carry, Liquor­land, Jumbo Shield, Saverite brands, Mass­ware­house, Makro and Fruitspot brands form­ing the whole­sale di­vi­sion, while Builders, Game, DionWired and Cam­bridge Food trad­ing brands would form the re­tail arm.

Brian Leroni, a group cor­po­rate af­fairs ex­ec­u­tive, said the strat­egy would im­prove cap­i­tal de­ploy­ment, un­lock­ing trad­ing brand syn­er­gies and de­liv­er­ing be­spoke re­tail and whole­sale cus­tomer fo­cus to cus­tomers.

Leroni said the strat­egy would also see Mass­mart driv­ing mar­ket agility and ef­fec­tive ex­e­cu­tion, lever­ag­ing group-wide pro­cure­ment scale and har­mon­is­ing group-wide func­tional prac­tice in line with best re­tail prac­tises.

“One ad­di­tional take­away is that the in­ter­nal merger of Makro and our Cash & Carry busi­ness cre­ates a R50 bil­lion African Whole­sale and B2B pow­er­house.

“Specif­i­cally it of­fers sup­pli­ers the big­gest sin­gle whole­sale route to mar­ket on the African con­ti­nent. An en­tity that will be in­te­grated and driven by world-class Makro whole­sale pro­cesses and sys­tems,” Leroni said.

Early this month the group said it planned to cut up to 1 440 em­ploy­ees jobs and close some stores.

New chief ex­ec­u­tive Mitch Slape has been tasked with a strat­egy of turn­ing around the busi­ness, which has been bat­tling un­der the low eco­nomic growth and con­strained con­sumer spend­ing.

Yes­ter­day, the group re­ported a head­line loss of be­tween R1.1bn and R1.2bn for the 52 weeks to end De­cem­ber from a profit of R901 mil­lion the prior year.

The group said in a trad­ing state­ment that its net losses, in­clud­ing the ef­fect of ac­count­ing stan­dards that bring leases on to the bal­ance sheet, could rise as much as R1.385bn.

Jordan Weir, a trader at Citadel, said the num­bers did dis­ap­point to the down­side, al­though this was broadly an­tic­i­pated.

“The share price was then largely ex­pected to hold at its slightly lower level fol­low­ing its ini­tial 5 per­cent drop, but sur­pris­ingly ral­lied more than 10 per­cent again af­ter the mar­ket shock had sub­sided.

“This prob­a­bly dis­grun­tled quite a few short-sell­ers who were seem­ingly on the right side of the trade,” Weir said.

On the re-or­gan­i­sa­tion of the busi­ness, Weir said ac­cord­ing to Mass­mart the re-or­gan­i­sa­tion of the group into two busi­ness units should bring about bet­ter unity in terms of busi­ness prac­tices. The sim­pli­fi­ca­tion of the com­pany from four to two busi­ness units will more than likely also pro­vide in­creased cost con­trol and bet­ter op­er­a­tional gov­er­nance for the group as a whole,” he added.

Mass­mart shares closed 6.44 per­cent higher at R53.75 on the JSE yes­ter­day.

HENK KRUGER African News Agency (ANA)

THE new strat­egy in­volves col­laps­ing the busi­ness into two di­vi­sions to im­prove cap­i­tal de­ploy­ment, un­lock­ing brand syn­er­gies. |

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