Massmart loses taste for fresh food as results dive

● Massmart has some tough truths to face as it grapples with a rough economic environment in the midst of its ambitious growth strategy.

Massmart CEO Mark Hayward said that, after almost eight years of selling fresh food in its Game stores, the retail group may limit its fresh food section.

“We are at a point where we might not roll it out to many more [stores] because what we’ve found is in the smaller stores, the space doesn’t quite work. So we put it in the big stores, whether it is a city or a town, and we are now slowing down as we get to the smaller stores and probably won’t put a big range of fresh, it will just be a smaller fresh range,” he said.

The retailer has weathered a challenging period that culminated in it losing a complaint it lodged at the Competition Commission against Shoprite, Checkers, Spar and Pick n Pay for what it said was anti-competitive behaviour.

Massmart released disappointing interim results on Thursday for the 26 weeks ended June. Massmart’s headline earnings slumped 42.2% to R210.9m.

The group attributed the slump to restructuring costs in its Massdiscounters and Masscash businesses, as well as the relocation of these divisions’ head offices from Durban to Johannesburg.

The group’s sales were up a meagre 1.9%, with sales at its Massdiscounters business, which includes Game and Dion Wired, slipping 4%. Sales at Masswarehouse — comprised of Makro and Fruitspot — increased 5.4%. Massbuild, which includes Builders Warehouse and Builders Express, had a 7.6% increase in sales.

Sales in the Masscash division, which includes Rhino Cash and Carry, Jumbo and Cambridge Food, increased 3%.

At the group’s results presentation, Hayward described the past six months as a “perfect storm” in the South African consumer environment, with a 2.2% contraction in first-quarter GDP and increases in VAT and petrol prices.

“It was a very difficult period and almost every factor that could go against us went against us,” said Hayward.

Massmart would continue with its expansion and was set to open 17 new stores before the end of the year, he said. Fourteen of these will be in SA and three elsewhere in Africa.

Alec Abraham, an analyst at Sasfin Wealth, said it was not surprising that Massmart was being cautious about its expansion plans outside SA.

“Most of the South African companies ... have tempered very much their prospects for opening stores in Africa.”

Abraham said Massmart’s performance was in line with how other retailers were coping in an environment in which consumers have had to cut down on discretionary spending.

This week Shoprite reported a 3.1% rise in sales and Woolworths a 1.6% increase.

Wayne McCurrie, from FNB Wealth and Investments, concurred, saying all retailers are having a difficult time in SA due to low consumer spending and food inflation.