Massmart, with total half-year sales of R39.6 billion, comprises two Business Units operating 420 retail and wholesale stores, in 13 sub-Saharan countries. Through our widely-recognised, differentiated retail and wholesale formats, we have leading market shares in the General Merchandise, Liquor, Home Improvement and Wholesale Food markets. Our key foundations of high volume, low cost and operational excellence enable our price leadership.

Group performance

Massmart’s total sales for the 26 weeks ended 28 June 2020 of R39.6 billion represents a decline of 9.7% compared to the same period in 2019, with a similar decline in comparable store sales. Sales were significantly impacted by various restrictions put in place by respective Governments in response to the Covid-19 pandemic in the jurisdictions in which we operate.

An increased focus on optimising our product and promotional mix, combined with shifting towards the everyday low price (EDLP) proposition resulted in the gross margin increasing by 90bps to 20.1% from June 2019.

With sales pressure and the significant impact of the Covid-19 pandemic on cash flows, we remain focused on improving expense management, with further savings being realised through cost saving initiatives implemented as part of our cost reset strategy. This resulted in operating expenses increasing by only 1.9% over the prior year period. A trading loss of R266.6 million was reported for the period.

As part of the turnaround plan, and as previously announced, the Group successfully closed 23 DionWired stores during the period. Restructure costs associated mainly with the above store closures and the potential closure of 11 Cambridge and Wholesale Cash & Carry stores, as previously announced, resulted in additional costs of R47.4 million. We have also impaired certain Game, Cambridge and Wholesale Cash & Carry stores resulting in impairment expenses of R55.5 million during the period.

Fluctuations in African currencies continue to negatively impact the Group, particularly the effect of US dollar denominated leases in other African countries, resulting in a total foreign exchange loss of R112.3 million. Despite pressure associated with lower cash flows from restrictions relating to the Covid-19 pandemic, the combination of ongoing focus on working capital management and reduced interest rates resulted in net finance costs (inclusive of lease liabilities) increasing by only 0.8% to R916.6 million during the period.

The Group reported a net loss of R1.2 billion for the period, compared to a loss of R0.8 billion during the same period in 2019, while reporting a headline loss of R1.1 billion for the period compared to a headline loss of R0.8 billion during the same period last year.

Operating environment and Covid-19 impact

Operating environment

The global outbreak of the Covid-19 pandemic has presented unique and significant challenges in both our economic and operating environments. The South African Government, and those of other African countries we operate in, implemented measures in an attempt to curb the spread of the virus. While we fully support these measures, they have had a significant negative impact on our trading. These unprecedented times brought with it further deterioration of the already weakened South African economy; with increasing unemployment rates, continued Rand depreciation and a further contracting GDP; placing additional financial strain on consumers.

Covid-19 impact

The measures put in place by Government have had a significant impact on our normal trading patterns during the reporting period.

During the five-week lockdown level 5 period, introduced from 26 March 2020, the sale of non-essential goods, General Merchandise, Home Improvement, Liquor and tobacco products were prohibited. None of our South African Builders stores were permitted to trade during this period, severely impacting our Home Improvement business. The above categories combined contributed approximately 56% of the Group’s total sales in the 26-week period ending June 2019.

With the introduction of lockdown level 4 at the beginning of May 2020, all Builders stores, in South Africa and the rest of Africa, were permitted to recommence trading. The sale of Liquor and tobacco products remained prohibited under lockdown level 4.

Liquor trading was permitted under lockdown level 3 from 1 June 2020, with restricted trading hours and days. On 12 July 2020, Liquor trading was once again prohibited, with tobacco sales still remaining prohibited since the beginning of the lockdown.

With the introduction of lockdown level 2 from 18 August 2020, the trading of both Liquor and tobacco products has been permitted, with restrictions on Liquor trading hours and days.

On a comparable basis, sales for the nine weeks restricted by the lockdown level 5 and 4 regulations, were R4.6 billion in the 2019 financial year. During this 2020 reporting period, additional employment and operating costs (of R76.2 million) were incurred in response to trading and operational challenges, including ensuring a safe shopping and workplace environment for customers and associates. Included in the employment and occupancy costs are Government supported Temporary Employment Relief Scheme (TERS) benefits and negotiated rental relief of R230.0 million in total received by the Group during the period.

The Group focused on preserving cash during the lockdown, while continuing to implement the turnaround plan. The lockdown further accelerated the implementation of the turnaround plan.

During the lockdown, we continued to pay suppliers on time and in full, which contributed to enhanced supplier relationships, ensuring no disruption in the supply of stock. Supplier payment terms were also renegotiated, where possible, to preserve cash while taking care of our most vulnerable smaller suppliers. The Group also continued to pay associates’ salaries and benefits on time and in full throughout the lockdown, partially supplemented by the TERS benefit received from the South African Government.

Group overview

Financial review

Massmart’s total sales for the 26 weeks of R39.6 billion represents a decline of 9.7%, with the same movement in comparable store sales and year-to-date internal sales inflation estimated at 3.7%. Sales from our South African stores decreased by 10.6%, with comparable stores sales decreasing by 10.5%. Total sales from our rest of Africa stores decreased by 0.1% in Rands, and by 3.8% in constant currencies. On a comparable store basis, our rest of Africa store sales decreased by 1.5% in Rands and by 5.1% in constant currencies.

The sales performance across our major categories is reflective of the dramatically shifting purchasing patterns seen by consumers during the Covid-19 pandemic, as well as trading restrictions. Food and Liquor sales of R23.1 billion decreased by 7.2% (June 2019: R24.9 billion), Home Improvement sales of R5.8 billion decreased by 13.4% (June 2019: R6.7 billion) and General Merchandise sales of R10.7 billion decreased by 12.3% (June 2019: R12.2 billion).

A combination of product and promotional mix optimisation and shifting towards the EDLP proposition resulted in gross margins improving from 19.2% to 20.1%.

Our continued focus on cost savings as part of the cost reset strategy, further accelerated by the lockdown, resulted in expense growth of only 1.9% over the prior year period, with a comparable expense growth of only 1.2%.

Employment costs, the Group’s biggest cost category decreased by 2.2% (with a comparable increase of 1.1%), due to the closure of DionWired stores, recruitment freezes and the impact of the South African Government TERS and Skills Development Levy relief. We also paid once off bonuses of R12 million to our front-line staff during April in appreciation of their commitment during the most severe lockdown period.

Occupancy costs decreased by 6.4% (with a comparable decrease of 7.3%), mainly as a result rental relief from landlords and lower utility costs as a result of the lockdown. Rental re-negotiation benefits will be realised from the second half of the year and beyond.

Depreciation and amortisation decreased by 1.8% (and by 2.1% on a comparable basis) due to reduced capital investments with a primary focus on cash preservation and the closure of DionWired stores.

Included in other operating costs are once off expenses which relate to value enhancing turnaround plan costs. Also included are implementation costs associated with the SAP S/4 HANA ERP system go-live in Game during the period, as well as maintenance costs of the Hybris web and fulfillment platform implemented in Makro in 2019.

The above resulted in a trading loss of R266.6 million compared to a trading profit of R318.9 million in the same period in 2019.

As part of the Group’s portfolio optimisation project, restructure costs of R47.4 million were incurred with the closure of the 23 DionWired stores and potential closure of the 11 Cambridge and Wholesale Cash & Carry stores.

Impairment costs of R55.5 million were recognised during the period relating to certain ongoing loss-making Game, Cambridge and Wholesale Cash & Carry stores.

Continued African country currency weaknesses, combined with the impact of US dollar denominated leases, resulted in total foreign exchange losses of R112.3 million.

Interest expense, excluding those related to lease liabilities, of R347 million was incurred in relation to the Group’s financiers and decreased by 0.8% compared to the same period last year. Total net cash finance costs increased by 2.5% to R851.8 million.

The Group’s effective tax rate of 16.6% (2019: -4.8%) is mainly due to limiting the recognition of certain deferred tax assets and the taxation charge on profit-making entities.

Financial position

Capital expenditure was responsibly managed to preserve cash during the period. The Group continued to invest in IT infrastructure and the refurbishment of selected existing stores. Total capital expenditure for the period amounted to R354.1 million, down 49.1% from the same period in 2019. This, together with the impact of asset impairments, resulted in property, plant and equipment decreasing by 5.0% compared to June 2019. Expansionary capital expenditure amounted to R242.9 million, of which IT infrastructure was R148.8 million mostly associated with the SAP S/4 HANA ERP system implementation in Game, while replacement capital expenditure amounted to R111.2 million.

We continue to focus on improving working capital. Reduced General Merchandise and Home Improvement sales and increased Food sales during the lockdown period resulted in a 1.4% decrease in inventory compared to June 2019. Due to the shift from non-Durables to Food sales, inventory days increased by six days. While trade receivables decreased by 14.5%, debtors days decreased by two days to eight days. Trade creditors decreased by 8.6% while creditors days increased by two days.

Operating cash inflows before working capital movements of R1,927.0 million improved by 3.1% over the prior year period from concerted efforts in cash preservation.

Despite the trading loss incurred during this reporting period (compared to a profit in June 2019), responsible cash management and cost saving initiatives resulted in an increase of net debt of 3.1% (excluding debt related to lease liabilities) compared to the prior year period.


We are thankful to all our associates, especially our frontline associates, who have adapted to new ways of working during these unprecedented times and continue to contribute to the Group’s performance and serving our number one asset, our customers. We are proud of the role we played as an essential goods provider during the lockdown period, while ensuring a safe environment for customers and associates. We are also thankful to the Board and Management teams for their continued support and commitment to the Group.


On 25 February 2020, the resignation of Enrique Ostalé from the Board, Remuneration and Nominations Committee was announced. The appointment of JP Suarez to the Remuneration and Nominations Committees was also announced, effective 25 February 2020. On the same day shareholders were informed that Charles Redfield was nominated for appointment as a non-Executive Director of the Board, effective 25 February 2020.

On 6 March 2020, Phumzile Langeni’s resignation from the Risk and Audit Committees to focus on her other Massmart Board and Committee duties was announced, with effect from 21 May 2020.

The appointment of Sandile Lukhele as the Group Company Secretary was announced on 13 August 2020, with effect from 1 October 2020. Sandile will also assume the role of Senior Vice President, Massmart General Counsel and Company Secretary and will serve as a member of Massmart’s Executive Committee, with effect from 1 October 2020.

Turnaround plan update

During the period, we have progressed our turnaround plan and have achieved the following thus far:

1. Group operating model:

Reorganised the Group operating structure into two Business Units, initiated Centres of Excellence and outsourced applications support to the Walmart India Development Centre.

80-140bps opportunity

2. Portfolio optimisation:

Closed 23 DionWired stores and, as previously communicated, are finalising the sale of 8 Masscash stores, while working through details of the remaining 3 stores.

R160 million PBIT improvement

3. Game reset:

Completed the SAP S/4 HANA ERP implementation and expediting everyday low cost execution.

220bps GP margin uplift

4. Wholesale integration:

Constituted a single Executive Committee, being presented as a single business to suppliers strengthening price competitiveness and piloted the integration of Makro and Builders onto the Shield B2B platform.

GP uplift of 50bps

5. Supply chain optimisation:

Increased vendor on-boarding into the network, delivered phase 1 of temperature controlled network and reduced Game aged and obsolete stock by 10%.

50bps of the 1% COGS reduction opportunity

6. Cost reset:

Validated R1.9 billion selling, general and administrative (SG&A) savings opportunity and aggressively executing against it.

54bps (as % of sales)


While we will continue to reach key milestones across the work streams according to our clear plan, we remain operationally focused on improving our professional retail effectiveness; our obsession with everyday low costing; and improving our margins through EDLP.

For a detailed update on our turnaround plan refer to the interim results presentation on our website.


Total sales for the 33 weeks to 16 August 2020 of R50.0 billion represents a sales decline of 10.5%, with the same movement in comparable sales growth. Product inflation is estimated to be 3.7%.

We expect the uncertain operating environment and negatively impacted economy related to the Covid-19 pandemic to persist. While trade in all our categories is currently permitted, future Covid-19 related trading restrictions remain uncertain. We are however, confident that we will be able to navigate through this, as we successfully did during the first half of this year. We will continue to accelerate the implementation of our turnaround plan and we expect SG&A and GP margin performance achieved during this reporting period to continue into the second half of the year.

The financial information on which this outlook statement is based has not been reviewed and reported on by the Company’s external auditors.


Our current dividend policy is to declare and pay an interim and final cash dividend representing a 2.0 times dividend cover, unless circumstances dictate otherwise. Due to the headline loss reported and the need to preserve cash, as a result of the uncertain economic outlook, no interim dividend has been declared. No interim dividend was declared in June 2019.


Mitchell Slape
Chief Executive Officer

Mohammed Abdool-Samad
Chief Financial Officer

26 August 2020