Massmart extends losses in South Africa as riots linger into 2021

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Massmart Holdings fell by the most in more than two months in Johannesburg after South African retailer Walmart said its loss widened in the first half.

Walmart expects to report a loss per share of as much as 450.3 South African cents for the six months ended June 26, excluding certain one-time items, compared to a loss of 298.8 cents a year earlier when the full results later this month, the company said in a trading update Tuesday.

Chief Executive Officer Mitchell Slape, the Walmart veteran tasked in 2019 to turn over the Johannesburg-based homewares specialist, has faced a range of issues ranging from pandemic-induced supply chain problems to a week of deadly South African riots a year ago.

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Consumer spending is under pressure from rising interest rates, with the central bank moving aggressively to curb inflation that hit a 13-year high in June, while frequent nationwide power outages have slowed economic growth.

Slape has already downsized the retailer and implemented broad cost savings. Still, Massmart’s Game chain is struggling as low-money buyers are buying fewer high-margin products such as refrigerators and washing machines.

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“Consumers have never had a decent wage increase, bond costs have risen, food has risen and the price of gasoline is 50% higher than a year ago,” independent analyst Syd Vianello said on the phone. from Johannesburg.

“With Massmart’s product mix, higher margin discretionary spending is more affected. This is the problem the CEO faces on top of trying to fix Game. It couldn’t have come at a worse time.”

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The stock plunged a staggering 9.9%, its biggest intraday drop since May 19, and was down 3.5% at 12:57 a.m. local time.

That brings the drop to 42% this year, compared to the 7.6% drop in the 10-member FTSE/JSE Retailers Index. Massmart also identified increased financing costs and a one-time interchange fee for terminating the lease during the first six months.


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