Massmart has started the process of closing its Game stores in East and West Africa after failing to find interested buyers, the retailer announced on Wednesday.
The owner of Makro and Builders had been hoping to sell the 14 stores to local investors and entrepreneurs with a “more intimate understanding of regional and local market conditions”.
It said it had initiated “potential store closure consultations” with affected staff members.
“What is true is that closing always costs more so it would have been the first prize to sell the stores,” said Alec Abraham, an analyst at Sasfin.
In December 2021, Massmart announced it was looking to sell its loss-making stores in East Africa and 15 stores in SA that were unprofitable.
It has not found buyers for any of the stores and has already closed seven in SA, with the remaining eight are being shuttered.
The plan to close the shops in Africa is in stark contrast to the expansion ambitions of the world’s largest grocer, Walmart, which in 2011 paid R148 a share for 51% of Massmart.
The company’s outgoing CEO, Mitchell Slape, has been working to fix the unprofitable Massmart business, merging four units into two, outsourcing administration and IT support, reducing warehouses and improving its supply chain and investing heavily in its online capabilities.
But it is struggling to show the results of its two-year turnaround strategy at Game, which was relaunched with a new layout in July.
There are 117 Game stores left in SA and neighbouring countries.
In its latest financial results, Massmart made a R903.5m headline loss in its six months to June, as consumers cut back on spending on big-ticket items such as televisions and treadmills.
It also made a R1.6bn annual loss in 2021 and a R1bn loss in the full 2020 financial year as Game continued to struggle.
The group shut down the unprofitable tech chain Dion Wired in 2020.
It has managed to find a buyer for its loss-making Cambridge and Massfresh discount grocery business, with Shoprite willing to pay R1.36bn for 56 low-income grocery stores, 43 bottle stores, a meat processing facility and 12 wholesale outlets.
However, this deal is awaiting Competition Tribunal approval as peers Spar and Pick n Pay have objected to the buyout by SA’s biggest retailer.
Slape told the tribunal in September that if the sale to Shoprite is blocked, Massmart will shut down the businesses in question.
The current sale process has taken over a year of negotiations and the group is losing hundreds of millions annually.
“I just want to be as clear as possible. The appetite from our board and, frankly, from our shareholders to continue like this is absolutely zero right now,” Slape said at the tribunal in September.
Walmart has made an offer to buy out the 47% of Massmart it does not own, which will mean delisting from the JSE.
Many investors have said the company needs to close Game and focus on its Makro and Builders businesses.
However, Slape has repeatedly said the business will not shut Game, having invested heavily in its software systems, layout, product selection, staff and online capabilities in the past two years.
Updated: October 5 2022
This article has been updated with new information
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