Tough Turnaround

Will Austerity Measures Save Walmart’s Wobbly African Retail Arm?

By  |  March 9, 2021

In 2019, the U.S.-based retail giant, Walmart, sent a long-time top official, Mitchell Slape, on a mission in South Africa. The task before Slape, who has been with Walmart since 1995, was to orchestrate a turnaround in Walmart’s ailing retail business in South Africa.

Walmart owns Massmart Holdings Limited; a South African firm that owns local brands such as Game, Makro, Builder’s Warehouse, and CBW.

Massmart prides itself as the second-largest distributor of consumer goods in Africa, and the largest retailer of general merchandise, liquor, and home improvement equipment, and wholesaler of basic foods.

As of 31 January 2021, Massmart operated 423 stores in South Africa and 12 other Sub-Saharan countries including Botswana, Lesotho, Ghana, Malawi, and few others.

But for quite some time, Massmart has had it rough, piling up losses in what is a tough retail market across several African countries. The man on a mission, Slape, was sent in by the higher-ups to stop the financial hemorrhage even though it might entail a very painful cauterization.

As CEO of Massmart, Slape set about his assignment without sentiments. Although the world was to basically come to a standstill shortly after his arrival due to Covid, the ship had to be steadied somehow. And steadying the ship has brought about some telling austerity measures.

With Slape overseeing the company over what seems a short period, the company has cut jobs, shut its Dion Wired chain, disposed of underperforming Masscash stores, and stopped selling fresh food in its household-goods chain, Game. The result? Some healthier numbers, it seems.

The Johannesburg-based company reported a narrowed loss for the 52 weeks ending December 27. Massmart has already cut 60 percent of the ZAR 600 Mn (USD 39 Mn) that was targeted in savings this fiscal year, and its shares have jumped to record levels.

However, it appears those business divisions that have been disposed of earlier are only the beginning.

Now, Massmart is looking to offload three more units as the South African retailer steps up efforts to put the company in a better position. As reported by Bloomberg, the divisions to be sold off are food-seller Cambridge, cash-and-carry chain Rhino, and Massfresh, whichcomprises The Fruitspot and a meat-processing facility.

The British multinational investment bank, Barclays Plc, has been appointed to rid the company of the assets, and CEO, Slape, says talks with specific buyers are yet to happen.

Massmart said it’s also considering exiting some African countries outside of its home market, South Africa, and immediate neighbors as part of the reorganization, though, as Slape said, there may be some “that we decide to double down in and invest further.”

“There is no question in my mind that there is upside potential for retail growth” in Africa, he maintains. “Even in the more immediate term, customer strength is beginning to return as we move out of Covid restrictions.”

Apart from all that, Walmart faces similar troubles in other regions, just like the one it is dealing with in South Africa and several other African nations. In recent times, there have been difficulties in China, India, and the U.K., as well as in Brazil where it was forced to sell off assets more than two years ago.

As the cost-cutting measures continue in South Africa, it will be interesting to see how the business shapes up in the coming months.

Featured Image Courtesy: iStock

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