Massmart forecasts annual loss, plans to reorganise business

A worker walks beneath a logo at Makro in Riversands, Midrand. Picture: Siphiwe Sibeko / Reuters
A worker walks beneath a logo at Makro in Riversands, Midrand. Picture: Siphiwe Sibeko / Reuters

Massmart Holdings on Thursday forecast a loss for the full year as it battled tough trading conditions in the second half and said it would reorganise four of its businesses into two divisions.

Massmart, majority owned by US retail giant Walmart, expects to report headline losses per share, excluding the impact of adopting the International Financial Reporting Standard 16 of accounting between 342.9 cents and 384.5 cents for the year ended on December 29 2019.

It reported annual headline earnings per share (Heps) of 416.5 cents last year. Heps is the main profit measure in South Africa and strips out certain one-off items.

Massmart said it would simplify its operations by reorganising its wholesale, warehouse, hardware and discount store businesses into two divisions – wholesale and retail.

The company’s total sales rose 3% to R93.7 billion in the 52-week period that ended on December 29, helped by growth outside South Africa, as the economy shrank for the second time in three quarters last year.

Massmart also expects to take an impairment charge between R200 million and R250 million before tax.

The company said earlier this month that it could cut up to 1 440 jobs under a plan to close some stores as it struggles to grow sales.

Massmart rivals such as Shoprite have struggled in difficult market conditions and currency weakness elsewhere in Africa, especially in Zimbabwe and Nigeria.

Cash-strapped shoppers continue to prioritise food over durables, resulting in lower sales of high-margin goods and higher sales in the lower margin food and liquor categories.

Massmart is expected to release its full-year financial results on February 27.

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