JSE-listed retail group Massmart's total sales for the 26-week period ended June 27 amounted to R41.3-billion, which is a 4.4% increase compared with the same period in 2020, with comparable store sales having increased by 4.8%.

The group expects to narrow its headline loss for the half-year period from continuing operations to between R316.9-million and R399.9-million, which is 61.8% to 51.8% improvement on the R830.4-million headline loss reported for the same period in 2020, Massmart said in an August 13 trading statement.

The group expects trading profit from continued operations to be between 751% and 771% better than the trading profit of R92-million reported in the same period in 2020, or between R690.92-million and R709.32-million.

Total sales from South African stores for the 26-week period increased by 5.9%, while comparable stores sales increased by 6.6%.

Total sales, measured in rands, from its Rest of Africa stores for the 26-week period, decreased by 10.1%, with comparable store sales decreasing by 11.2%.

Sales performance in the Rest of Africa was impacted by currency fluctuations over the first half of the year.

When measured in constant currency, total sales relating to its Rest of Africa stores increased by 1.6%, with comparable store sales increasing by 0.3%.

Foot traffic in most super and regional malls and retail centres remained constrained, as consumers prefer to avoid crowded indoor spaces in light of Covid-19 infection concerns.

Consequently, given its relative high presence in these locations, Game’s total sales of R7.6-billion was 7.6% lower than the same period last year, with comparable stores sales being 6.9% lower.

Sales from South African Game stores decreased by 4.6%, with comparable stores decreasing by 3.7%. Sales from the Rest of Africa Game stores decreased by 18.6% in rands for total and comparable stores, while decreasing by 5% in constant currency.

Further, total sales in Cambridge of R3.6-billion were 9.4% lower than the same period in last year, decreasing by 9.6% on a comparable stores basis. Sales trends indicate that customers in this segment of the market are mostly impacted by the pressures of increased unemployment and lower disposable income, the group said.

The sales process of the Cambridge and Massfresh businesses continues and the results of Cambridge and Massfresh are treated as discontinued operations.

In Makro, total sales of R13.7-billion was a 13.5% increase over the prior year, while total sales in the Cash & Carry business of R9.3-billion were 2.3% lower than the same period last year.

Food sales remained under pressure, decreasing by 2.9% in Makro and 8% in Cash & Carry, as a result of ongoing lower activity in the corporate, hospitality, restaurant and catering industries.

However, liquor and general merchandise sales have performed well. Total liquor sales in the combined Wholesale business were 39.6% higher than in 2020, which was impacted by the ban on liquor sales in April and May 2020.

The Builders businesses have continued to see strong sales performance, with total sales of R7.2-billion being 24% better than 2020, with comparable stores sales growing by 22% driven mainly by strong retail demand.

Trade sales continue to be muted owing to the slowdown in the construction industry. Builders was restricted from trading for most of April 2020.

"While sales have recovered compared to the same period last year, we continue to see sales pressures persist in Game, Cambridge and Wholesale food and liquor," Massmart said.

However, ongoing focus on trading discipline, driving everyday low prices, while maintaining our competitive pricing gap and the positive impact from sales mix changes, has continued to support enhanced gross profit margin percentages. Simultaneously, expense control and focused cost savings initiatives continue to deliver results ahead of expectations, with total expenses expected to be lower than the prior year period.

Earnings are expected to be adversely affected by the impairment of the carrying value of assets in Game of approximately R570-million, as well as retrenchment costs relating to the reorganisation of certain home office support functions. Interest costs are also expected to improve on the prior year owing to improved levels of average borrowings.

"Consequently, Massmart expects, with a reasonable degree of certainty, that earnings on a continuing basis, which excludes the Cambridge, Rhino and Massfresh businesses as discontinued operations, will result in a net loss of between R745.1-million and R835.9-million, which will be between 7.9% and 17.9% better than the R907.7-million net loss posted in the comparable period in 2020."

Further, total business earnings will result in a headline loss of between R590.9-million to R699.9-million, or 35.8% and 45.8% lower than the R1.09-billion headline loss during the same period in 2020. It expects total business net loss to be between R1.03-billion to R1.14-billion, which will be between 1.5% and 11.5% better than the R1.16-billion net loss during the same comparable period in 2020.

UNREST IMPACT
A total of 43 stores and two distributions centres have been directly impacted by the recent civil unrest and looting events in KwaZulu-Natal and Gauteng. In addition, a number of additional stores have been closed for a short period of time in light of safety concerns.

Of the 43 impacted stores, operations in eight stores have already restarted and, with the exception of those stores that sustained structural damage, most stores should be open for business in the coming weeks.

All of the stores not directly impacted were reopened for operations within one week, with the exception of the Makro store in Cornubia, Durban, which remained closed until end of July as a result of air-quality concerns stemming from fire damage from a neighbouring chemical storage facility.

"In addition, we have successfully shifted replenishment capabilities into our other distribution facilities to ensure continuity in the replenishment cycle for all of our stores, despite the impact of the two affected distribution centres," the group said.

It is too early to estimate the cost of damage caused by the civil unrest and the subsequent loss of sales. Insurance cover is in place, but will not fully offset the losses suffered, Massmart said.

Once the assessment of the full extent of the damage is finalised, we will determine the extent of the uncovered losses. The group will provide a further update on the resumption of trading in the remaining affected stores in due course.

"We remain focused and committed to helping our associates, customers and the communities that we serve.

"In addition to the distribution of basic need support packages and providing access to basic goods to our associates in KwaZulu-Natal, we have also committed significant donations of food and basic goods to disaster relief partners to alleviate pressure on the most vulnerable communities."