Massmart, the African subsidiary of Walmart Inc. said its African operations reported a net loss for the first half of the year.
Massmart who is the parent company of the Nigerian is a general merchandise and grocery retail chain, Game, said the half-year loss was due to higher costs, foreign exchange losses and slower sales of high-margin goods such as washing machines and flat-screen TVs.
Massmart which has expansive operation across Africa with a core presence in Southern Africa said it recorded a net loss for the six months to June 30 of 832.4 million rand ($54.63 million) versus a profit of 190 million rand a year earlier, according to data compiled by Reuters.
The company said the result was also impacted by the accounting standard IFRS 16.
Massmart said its total sales rose 5.5% to 43.8 billion rand and the company reported a trading loss before interest and taxes of 1.4 million rand.
Lower sales of high-margin durable goods and higher sales in lower margin food and liquor categories resulted in gross margins falling by 36 basis points. Expenses rose by 11.8%.
“Cash-strapped consumers continue to spend proportionately more on our sales promotion activities which causes further gross margin pressure,” the company said in the statement.
Operating as Mass Discounters Ltd in Nigeria and trading as Game, the group CEO, Guy Hayward, who is stepping down at the end of August, said:
“The prevailing low growth economy, coupled with various internal missteps, have contributed to an unsatisfactory set of results,”
“Going forward we see useful opportunity to improve our operating model to position the business to better adjust to the changed economic reality.”
Massmart is suffering from currency devaluation and weaknesses in various markets including Nigeria.