Massmart appoints new CEO, but shares fall on warning earnings will halve

Shares in Massmart, which owns the Game and Makro chains, fell 12.5% to R68.24 in early trade on Thursday after the retailer said earnings in the six months to June could more than halve.

Massmart, which was bought by US retail giant Walmart in 2011, said it had seen “weak and variable sales trends” in recent months.

The retailer said interim headline earnings “may be at least 50% lower” than a year before. 

Operating profit after restructuring costs, nontrading items, foreign-exchange movements and interest paid could fall by 60%, due in part to currency losses.

“Current economic data and sentiment cause us to believe however, that most risks associated with the above estimates are likely to the downside,” Massmart said.

In the first 20 weeks of the 2019 financial year, Massmart’s sales grew 6.1% to R33.5bn, with comparable sales up 4.1%. Sales were up in each division and product inflation was 2.5%.

However, margins were under pressure from “the lower sales participation in our higher-margin durables and home-improvement categories and formats”.

Margins were also dented by expense growth.

This meant earnings in the year so far to April were down in each division.

Meanwhile, Massmart said in a separate statement Walmart’s Mitchell Slape will take over as CEO after he gets approval to work in SA.

Slape will succeed Guy Hayward, who will then “remain in Massmart until later in the year to ensure an orderly handover and transition”.

“Mitchell is a career retailer and has been with Walmart since 1995,” Massmart said.

Slape’s prior roles include chief operating officer of Walmart’s business in Japan and senior vice-president of international business development at Walmart International.

“Mitchell’s well established Walmart network and extensive retail experience uniquely positions him to leverage the relevant resources needed to elevate Massmart’s operating performance,” Massmart said.

hedleyn@businesslive.co.za