Massmart’s financial results for the year ended 29 December 2019 clearly show why the company wants to close its Dion Wired stores.
Its Massdiscounters division, which is comprised of Game and Dion Wired, reported a 2,169.3% decrease in trading profit compared to the previous year.
The trading loss for 2019 stood at R674.6 million. This is compared to a trading profit of R32.6 million in 2018.
“Massdiscounters total sales for the 52 weeks of R19.8 billion was 0.3% up on last year, most notably impacted by lower consumer spending on durable goods. Comparable stores sales contracted by 2.1% and product deflation was 0.2%,” said Massmart.
Despite the decline, the company said its Game stores in South Africa saw foot traffic increase by 4% year-on-year – resulting in sales increasing by 1.9%.
“In the rest of Africa, Game’s sales decreased by 0.8% in rands and by 1.5% in constant currencies – owing to currency weaknesses during the period.”
For Dion Wired, sales continued to decrease and were 19.8% lower than 2018.
“Expenses increased by 8.7%, with comparable expenses increasing by 6.9%. Included in this were the costs associated with store openings and IT costs expensed. The implementation of the SAP S/4 HANA ERP system is continuing and is expected to be completed during 2020.”
Four Game stores were opened during the period, and two Dion Wired stores were closed, it added.
Dion Wired closing
The results follow a recent announcement by Massmart that it plans to close its Dion Wired stores.
Masscash wholesale outlets are also set to be affected by store closures. In total, 1,440 employees may be affected by the move.
The outcome of the plan depends on how the retrenchment process unfolds, but the group said the decision to shut the stores came after a comprehensive review of its portfolio.
Speaking to MyBroadband, Massmart has indicated that should the Dion Wired shut down go through, Game stores will take over the servicing responsibilities of products bought at Dion Wired, hinting at Game’s future role in the group.