Massmart half-year headline loss widens to R1.2bn

Massmart, one of South Africa's leading retail groups, has faced significant challenges in the first half of the year as a result of the ongoing COVID-19 pandemic and its impact on consumer behavior and spending patterns. The company recently reported a staggering net loss of R1.2 billion, reflecting the harsh reality of the current economic climate. CEO Mitch Slape sat down with CNBC Africa to discuss the company's interim results and shed light on the various factors contributing to their financial struggles. Throughout the interview, Slape emphasized the unprecedented nature of the past few months and the profound impact that restrictions and lockdowns have had on Massmart's operations. With certain categories of products being prohibited for sale at various points, the company estimates a loss of around 4.6 billion rand in sales, with a significant dent in profit margins as well. However, despite these setbacks, Slape noted that when the stores are allowed to operate without restrictions, there is a positive uptick in sales. Customers are returning, making larger purchases, and overall, there is a sense of optimism in terms of sales volume in an unrestricted environment. In response to the declining activity in the retail sector, Massmart has adopted a strategic focus on low-cost products to help stabilize margins. This approach was part of a turnaround plan initiated earlier this year, but has gained further momentum due to the current economic challenges. The company saw a 90 basis point improvement in gross profit margin in the first half of the year and successfully curbed expense growth to 1.9%, compared to over 11% in the previous year. Slape expressed confidence in the sustainability of this strategy, believing that it will continue to benefit the company in the long term. When asked about the collaboration with Massmart's parent company, Wal-Mart, Slape highlighted the close relationship between the two entities. Since assuming his position as CEO, Slape has worked closely with Wal-Mart's executive team, implementing various initiatives and leveraging Wal-Mart's resources to support Massmart's operations. The company has benefited from shared expertise in negotiating with suppliers, cost-saving programs, and operational strategies. Additionally, Massmart is tapping into the knowledge and support of Wal-Mart's India Development Center, as well as welcoming experts in supply chain and strategy from the global retail giant. The collaboration extends to regular meetings with other Wal-Mart country presidents to discuss not only COVID-19 related challenges but also broader business issues. Slape views Wal-Mart's support as instrumental to Massmart's ongoing turnaround efforts and expressed gratitude for the partnership. Despite the daunting financial losses and operational hurdles faced by Massmart, the company remains committed to navigating the uncertain economic environment and adapting its business strategies to meet the evolving needs of consumers. Slape's optimistic outlook and confidence in the sustainability of their cost-saving initiatives signal a resilient approach to weathering the storm and emerging stronger on the other side.