Walmart to evaluate Massmart business

Walmart’s $2 billion investment in the 2011 acquisition of South African-based retailer Massmart has been met with many challenges. The retail giant said much of that relates to the volatile economic environment across the continent.

The Massmart business has been under pressure in the first half of 2019 and the retailer operates mostly in general merchandise, which is a discretionary spend. Walmart owns 52% of Massmart with roughly 400 locations, heavily concentrated in South Africa.

Tuesday (June 11), Richard Mayfield, chief financial officer for Walmart International, took part in the Deutsche Bank global consumer conference. He was asked about Massmart’s future given the top two leaders in that market recently resigned.

Mitch Slape was recently named the new CEO for Massmart. He has been with Walmart International since 2015 when he joined the company as COO for the retailer’s stores in Japan. He also has held several global leadership positions in Argentina, Korea, Mexico.

Slape, 52, is seen by some as a “fixer” of sorts, and now oversees roughly 25,652 employees at Massmart spread out across 13 countries. He was named to that position last month just two weeks after the resignation of CEO Guy Hayward, who had run the business for the past five years.

“Mitch [Slape] is a pretty experienced international retailer and we’ve hired Mohammed [Abdool-Samad] a new chief financial officer out of Illovo, which is a publicly quoted sugar business owned by ABF,” Mayfield said. (Abdool-Samad will begin that role Aug. 1.)

“We feel pretty good about that management team. I think the first job is to trade the business well, but clearly, we’ll be reviewing the portfolio of businesses and the operating model. I think there is a lot of opportunity for efficiency and cost savings,” Mayfield said,

One area he expects to see the focus is on reducing costs related to goods not for resale, which can account for up to 25% of a retailer’s total operating costs.

“We think there are some big opportunities to create value in that business [Massmart] and clearly with a new management team in place we’ll be looking to do that,” Mayfield said.

Mayfield said GDP in Africa was -3% in the first quarter and there has been pressure on the business.

“I think, with an election out of the way I think we should start to see some improvement in economic conditions. We have a fairly strong food component to that business, but I’m sure this year is going to be a challenging one with those kinds of economic conditions,” he added.