South African Retail Giant, Massmart, Exits Nigerian Market
Due to declining consumer demand and currency volatility, South African retail giant, Massmart has sold its Games Discount World stores in Nigeria. According to information obtained by BusinessDay, the assets were sold to the main shareholder of PricePointe Wholesale Club, a company that runs a wholesale store in Lagos.
As a result of Walmart, a major international retailer that currently holds a majority 51 percent stake in Massmart, reporting continued losses for Massmart for FY 2021, Massmart’s Chief Executive, Mitch Slape, had hinted last year that Massmart was selling off its general merchandise Game stores in West and East Africa to reduce losses.
Massmart announced it would examine its portfolio of stores outside of Southern Africa as part of a recovery plan to stabilize the firm.
“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.
The review has now resulted in the disposal of 14 stores across Ghana, Nigeria, Uganda, Kenya and Tanzania.
After a year of consideration and interaction with various stakeholders, the sale of the Nigerian Games Discount World outlets to PricePointe Wholesale Club was completed. According to Massmart, under the direction of investors who are more familiar with local market conditions, overall store performance should increase.
Additionally, it was stated that Game South Africa would continue to support the buyer after the sale was finalized in order to ensure their business success. It was noted that this support would include allowing the buyer to use the Game brand for a period of six months following the formal completion of the sale and providing specific merchandise procurement support for a period of one year.
Insights on the Massmart Exit
After the Walmart-owned retailer disclosed a reduced half-year deficit on Friday, Massmart CEO Mitch Slape announced plans to sell up all of its general merchandise Game stores in West and East Africa to reduce losses in that underperforming division.
Forays into African markets by Massmart, which owns Game, Makro, and hardware chain Builders Warehouse, have been marred by currency instability and restrained consumer demand. This situation made it challenging to operate profitably on a continent that was once viewed as a promising growth market for retailers. This includes Nigeria.
Forays into African markets, including Nigeria, have been marred by currency volatility and restrained consumer demand, making it challenging to operate profitably on the continent that was once hailed as the next bright growth spot for retailers. This is similar to the experience of its peer Shoprite Holdings.
Massmart aims to narrow management’s focus and increase investment in high-yield assets and online by selling non-core and underperforming assets and closing stores. The majority shareholder of PricePointe Wholesale Club also paid for the assets of Massmart in the four additional nations that are included in the acquisition deal.
In several of the impacted nations, regulatory clearances are necessary for the transaction.