South Africa's Massmart to offload Cambridge, Rhino and Fruitspot

JOHANNESBURG (Reuters) - South Africa’s Massmart plans to sell its food retail outlets Cambridge Food, Rhino and fruit and vegetable distributor Fruitspot to focus on high returning businesses.

A worker arranges fruits on a shelf at Makro Store Riversands of South African retailer Massmart in Midrand, South Africa, August 28, 2019. REUTERS/Siphiwe Sibeko/File Photo

Massmart, which on Monday reported a narrower full-year headline loss, is majority owned by Walmart Inc and last year announced a turnaround plan to return to profit.

Shares in Massmart were up 9.29% at 0901 GMT.

The original plan involves shutting underperforming stores, exiting fresh food and launching clothing in its Game chain, which sells everything from electronics to gym equipment and home furnishings.

Massmart said it was now moving beyond this to focus on investing in core businesses and those offering high returns.

“It’s important for Massmart to focus on those businesses where we have established clear market leadership and in the case of Cambridge and Rhino and retail food in general our market share is relatively small,” CEO Mitch Slape said.

Together these businesses employ 7,000 and own 57 stores, three fresh produce facilities and one meat processing plant.

Massmart also said it had appointed Barclays to facilitate the sale of the food retail outlets.

“The time, the energy and the investment to get that business into what we would consider a market leadership position is not a valuable use of the company’s resources,” Slape said during a conference call after its results.

The retailer, present in 13 countries in Africa, will also review its stores outside the southern Africa region in the second quarter of 2021 as part of the turnaround plan.

Slape said the review may include divesting from some stores or doubling down in some markets.

Massmart, which is also a wholesaler, said it has delivered more than 30 turnaround projects. These had led to 600 million rand in total expense savings, contributed to margin uplift and significantly improved overall efficiency.

In the 52 weeks ended Dec. 27, gross margins rose by 147 basis points while expenses fell 0.3%.

Its headline loss, the main profit measure in South Africa, slightly narrowed to 924 million rand from a loss of 1.2 billion rand in 2019, while its net loss widened to 1.8 billion rand.

Group sales fell by 7.7% to 86.5 billion rand, hit by COVID-19 restrictions. The Game and Makro department chain owner estimated that it lost out on sales worth 6.1 billion rand in 2020 due to the restrictions.

($1 = 15.3487 rand)

Reporting by Nqobile Dludla; Editing by Aditya Soni and Alexander Smith