Wal-Mart acquired a 52% stake of South African-based Massmart in 2011 for $1.58 billion as part of the retailer’s emerging market strategy. But eight years later the retail giant rarely mentions the investment in its quarterly earnings calls or conferences.
The assets of the deal include more than 400 stores in South Africa and 12 other sub-Saharan countries. Massmart is the second largest distributor of consumer goods across Africa and the leading general merchandise retailer, liquor and home improvement equipment, electronics and a leading wholesaler of basic foods.
More than 100 employees from Massmart are in Bentonville this week attending Walmart’s annual shareholder week of festivities. They are among the 4,500 employees living in the residence halls at the University of Arkansas. Walmart houses the employees on campus where they also take part in meetings and meals are provided by the university’s food service division. Walmart will pay the UA for this service though no amount has yet been publicly discussed, according to Steve Voorhies, spokesman for the UA.
Talk Business & Politics spoke with Richard Fuller and John Hart each visiting from South Africa where they work in the DionWired division – electronics and appliances – of the mass discounters division of Massmart. Hart said it’s his third trip to Bentonville and he has logged 26 years at Massmart. Hart has put in 13 years with Massmart and also said this is a repeat visit for him.
Fuller and Hart said they love attending the annual meeting because there is always something new to learn in retail. They look forward to the International Meeting which will be held Wednesday (June 5). Morgan Sikhwari also made the trip from his homeland of Durban, South Africa.
“I just love seeing retail on a global scale and there is a great deal for me to absorb this week. I look forward to taking the learnings back to my homeland. This is a great opportunity for me to see the local stores, talk with management and then export that knowledge back home to help grow that segment of the business,” Sikwari said in an interview on the Bentonville Square on Tuesday as the group toured the Walmart Museum and posed with their national flags.
While the Massmart employees chanted Tuesday outside the Walmart Museum on the town square, there is little known or spoken of the Massmart business by the executives in Bentonville. Massmart is a publicly traded company and it reports earnings twice a year, the most recent was the 52-week report ended Dec. 30, 2018. While Africa has been praised for its growth potential, economic growth has been slow. At the end of 2018, Massmart reported it maintained strong market share across durable goods categories including small and large domestic appliances, hi-tech and most DIY and hardware categories. Sales overall rose 2.9% led by the group’s South African stores which generate 91.3% of total sales. Comparable sales rose 1.5% for the group but gross margins fell slightly to 19.45%, according to the release.
Massmart reported a 56% increase in online sales for the year. Massmart runs four e-commerce operations (Macro, Game, DionWired and Builders Warehouse). Massmart said the four businesses registered a 74% increase in online traffic for the year. While the company said it was pleased with the online growth it will also continue to pursue new revenue streams in the services area such as lotto sales, money transfers, credit cards, and extended services. These services experienced 61% growth for the year.
Total sales for Massmart in 2018 were valued at $90.9 billion Rand or $6.201 billion (U.S.) Massmart accounted for about 5.13% of Walmart International sales for last year. This diverse international business unit run by CEO Judith McKenna reported total sales of $120.8 billion for the previous fiscal year ending Jan. 31, 2019. Total international sales rose 2.3% from the year-ago period.
Mitch Slape is the newest president and CEO for Massmart. He has been with Walmart International since 2015 when he joined as COO for the company’s stores in Japan. He also held several global leadership positions in Argentina, Korea, Mexico and the International Support Center.
Slape, 52, is seen by some as the “fixer” and now oversees more than 25,600 employees at Massmart in 13 countries. He was named to that position last month just two weeks after the resignation of CEO Guy Hayward who ran the business for five years. Slape is expected to usher in changes to the Massmart business unit after having helped turn around the stagnant business in Japan.
Insiders say Massmart has been a disappointment of sorts to Walmart, which is why executives rarely mention the investment, choosing to focus on China, Mexico, Canada and more lately India with the blockbuster acquisition of Flipkart last year.
Massmart’s holdings are largely concentrated in South Africa with 390 retail units, the next largest is Botswana with 11 retail units, with Zambia having 7 locations, Mozambique with 6 stores and Nigeria with 5 retail locations.
Amid the economy slowing across the continent, Massmart began transitioning some of the mass discounters and mass warehousing distribution centers into Massmart Logistics, a segment used to support future growth, according to the annual report. Massmart said the company is also focused on leveraging further opportunities to achieve supply chain efficiency and increase product velocity that should result in improved cost recoveries over time.