South Africa’s Massmart in east and west Africa to sell 14 Game stores

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Massmart is selling all of its general merchandise Game stores in West and East Africa to reduce losses in that underperforming company, chief executive Mitch Slape said on Friday, after the Walmart-owned retailer announced a reduced half-year loss. Shoprite Holdings’ excursions into African markets, particularly Nigeria, have been hampered by currency volatility and limiting customer demand, making it tough to operate successfully on a continent that was once hailed as the next bright growth spot for retailers.

Massmart has indicated it will assess its store portfolio outside of Southern Africa as part of a recovery plan to stabilize the firm. In the end, 14 outlets were shut down in Ghana, Nigeria, Uganda, Kenya and Tanzania as a result of the study. “The performance and the complexity in running those businesses is something that frankly we needed to address. We’ve commenced a formal sales process, we’re currently in discussions with potential purchasers to take on those stores,” Slape told investors.

Massmart wants to sharpen management’s focus by disposing of non-core and underperforming assets and closing stores in order to invest in high-return assets and online. Slape claimed the move will result in an annual profit boost of 750 million rand ($50.24 million) before interest and taxes (before taxes). Due to sustained currency weakening, Massmart, which operates in 12 African nations, reported a decline of 18.6 percent in rand terms and 5 percent in constant currencies for the 26 weeks ended June. As a result of lower overheads, reduced Africa exposure, and possible further shop closures or disposals in the future, Slape predicts that Game will be able to break even. “But that is not enough. Achieving break even performance isn’t going to be sufficient for us to be satisfied, we’ve got to really get Game back to a healthy level of profitability and performance,” he said.

Mohammad Abdool-Samad, the group’s chief financial officer, believes Game will break even within the next 12 months.