Makro, Game owner plummets as it warns of larger loss

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Massmart, the embattled owner of Game and Makro, expects its headline loss to increase by at least 51% for the 26 weeks to end-June, to a possible loss of R974 million, from R645 million in the previous period.

On Tuesday morning, its share price dropped 8% in response. It has now lost 45% over the past year. 

Total group sales for the period amounted to R41.3 billion, "broadly in line with the same period last year", Massmart said.

Sales of general merchandise declined by 1.4% compared to the same period last year "as consumers prioritised non-durable goods spending in the context of rapidly increasing food, energy and transport cost inflation".

Liquor’s like-on-like sales increased by 21% over the same period last year, while food sales increased by 6.4%.

Rising costs put Massmart's profit margins under pressure, which contributed to its growing losses. At its Builders stores, a recovery in the construction sector increased trade sales, but these were at thinner margins.

Its earnings were also hit by a once-off lease exit settlement cost of R184 million after its Riverhorse Distribution Centre was destroyed in the July civil unrest. In addition, it had to pay increased interest payments due to its growing debt. Massmart says this increase in debt was also a direct consequence of the impact of the July civil unrest. However, this debt balance started to decline as R370 million in business interruption claims were settled.

Recently, the Competition Commission recommended that Massmart’s sale of Cambridge Food, Rhino and Massfresh to Shoprite for R1.36 billion be approved. These businesses are treated as discontinued operations. Total sales from these discontinued operations of R2.9 billion were almost 20% lower than the same period last year.

Massmart’s results for the 26-week period will be released on 29 August.