JSE-listed Massmart was unable to trade in the majority of general merchandise categories, home improvement and liquor products for most of the month of April, which had a significant impact on its sales during that month; however, from the beginning of May it was able to gradually start trading in more product categories.
Most notably, its Builders stores throughout the country were able to restart sales to the general public.
However, restrictions on the sale of liquor and tobacco products remained in place throughout the month of May.
Missed liquor sales for the months of April and May are estimated at about R2.3-billion based on prior year sales.
In line with Level 3 lockdown regulations, which took effect from June 1, Massmart is now able to trade in all product categories with the exception of tobacco and related products.
Trading hours relating to liquor are also still restricted, with no liquor sales allowed from Friday to Sunday or on public holidays.
For the 19-week period ended May 10, total sales decreased by 11.9% over the prior year, with comparable store sales down by 12.1% over the same period.
With the easing of the lockdown from Level 5 to Level 4, pent-up demand for home improvement products drove strong sales at its Builders stores during May, while pent-up demand for general merchandise goods supported better sales performance at Makro and Game as the month progressed.
Consequently, total sales for the 23 weeks ended June 7 amounted to R34.8-billion, which is 10.3% lower than the prior year, while comparable store sales were 10.5% lower year-on-year.
Sales from Massmart’s South African stores amounted to R31.3-billion, 11.5% lower than for the same period last year, with comparable store sales down by 11.5%.
Total sales from Massmart’s stores outside South Africa amounted to R3.5-billion, or 1.2% higher than the prior year, with comparable store sales down by 0.3%.
ESTIMATED IMPACT
The Covid-19 national lockdown has had a significant impact on the trading performance of Massmart as a group, it noted.
For the nine-week period from March 30 to May 31, total sales were R4.6-billion lower than the same period during the prior year.
Operating costs attributable to the execution of safety protocols in its stores in line with regulated requirements amounted to about R50-million.
Despite the lockdown, the group has not slowed down the implementation of the turnaround plan announced at its Investor Strategy Day at the end of January.
Rather, it has accelerated some of the initiatives – particularly the cost-reset project, group restructure into a Wholesale and Retail business units and the Game turnaround plan.
LIQUIDITY AND CASH FLOW MANAGEMENT
The extended Covid-19 trading restrictions intensified the daily focus on liquidity and cash flow management for the group.
Massmart has continued to meet all payment obligations to suppliers and employees as it successfully navigates through the various levels of lockdown, the group said.
Its focus remains on prudent cash flow management and the implementation of strategies to improve cash generation performance through key initiatives, including negotiated rental savings, mutually beneficial commercial terms with its vendors, applying for available Tax Incentive relief measures and aggressively pursuing the cost reduction initiatives already outlined in its turnaround plan.
Massmart’s balance sheet remains strong and, based on its various cash flow forecast scenarios, the Massmart group has sufficient cash facilities and resources to meet its obligations.
Further to the facility support provided by local financial institutions, the group secured a R4-billion inter-company loan from parent company Walmart to provide additional headroom in the event of unforeseen circumstances as it navigates through the lockdown period and beyond.
TRADING STATEMENT
As referred to above, the Covid-19 lockdown has had a significant impact on trading performance.
While sales and margins have been lower than the same period last year, increased focus on expense management and cost savings initiatives are bearing fruit, with expense growth expected to be contained to well below inflation, Massmart said.
Consequently, Massmart expects, as a result of the impact of the Covid-19 lockdown, with reasonable certainty, that the loss a share and headline loss a share, will be at least 50% or 191.1c and 182.4c lower year-on-year respectively.
Excluding the impact of the Covid-19 lockdown, it expects the loss and headline loss would have been slightly better than the same period last year.
Massmart’s financial results for the 26 weeks to June will be released on August 27.