Trade restrictions have negated the brief peak in sales experienced in March due to panic buying ahead of the lockdown. Image: Waldo Swiegers, Bloomberg

Group reports ‘significant impact’ on normal trading.

Retail and wholesale giant Massmart reported an 11.9% slide in total sales (R28.2 billion) for the 19 weeks ending May 10 due largely to the Covid-19 lockdown and trade restrictions in South Africa, its largest market.

In a trading update on Monday, the group said the lockdown had a “significant impact” on normal trading since a considerable share of its goods could not be sold during the five-week Level 5 lockdown.

“Sales from our South African stores amounted to R25.3 billion, 13.1% lower than last year, with comparable store sales decreasing by 13.2%,” it said. “Total sales from our ex-South Africa stores amounted to R2.9 billion, 1.3% higher than last year, with comparable stores decreasing by 0.3%.”

Although not mentioned in its latest Sens statement, the closure of the group’s DionWired stores is likely to have contributed to a decline in sales.

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In a previous trading update on March 30, the group noted that total sales had increased 1.3% for the 13-week period ended March 29, compared with the prior year, while comparable store sales increased by 0.9% over the same period.

This showed that the group saw a peak in sales as South Africans embarked on panic buying in the last two weeks of March, after state of disaster measures and plans for a lockdown were announced. However, the trade restrictions following the lockdown have negated the short peak in sales, as seen in the double-digit decline in sales for the period to May 10.

Sales bans

While some of these trade restrictions have been eased under Level 4 of the lockdown, which came into effect on May 1, liquor and cigarette sales continue to be banned.

“Massmart was unable to trade in the majority of general merchandise, home improvement and liquor products for most of April. These untradeable product categories represent a significant portion of our overall merchandise offering,” the group said on Monday.

“The contribution of these product categories to sales in the 2019 financial year was as follows: General Merchandise (26%), Liquor (15%) and Home Improvement (15%). Given the high level of contribution of these categories to total sales, April Covid-19 sales were significantly lower than would be the case under normal trading conditions.”

The group reiterated that it has a strong balance sheet, noting that based on cash flow forecasts, it “has sufficient cash facilities” and resources to meet its obligations.

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“The intensified pressure resulting from extended Covid-19 trading restrictions increased the daily focus on liquidity and cash flow management,” it said.

“In line with good financial practice, Massmart continued to focus on prudent cash flow management and initiatives to improve cash generation performance. These included initiatives to negotiate rental reductions and improved, mutually beneficial terms with strategic suppliers.”

Massmart said that it “met all payment obligations” throughout the lockdown period and has continued to pay all employees in full.

“We will continue to proactively work with all suppliers and stakeholders to manage our cash position going forward.”

Article Source: https://www.moneyweb.co.za/news/companies-and-deals/covid-19-lockdown-sees-double-digit-sales-slide-at-massmart/