Retailers in townships downplay Metcash
Adapted from BusinessDay - Jun 6th 2012, 09:00
Local retailersâ€™ expansion into under-serviced areas such as townships may have led to the collapse of what was once the biggest wholesale business in Africa, Metcash Trading Africa, which after 44 years is no more.
Metcash CEO Peter Dodson said yesterday the groupâ€™s financiers had "run out of patience" with the company, which had now started winding down. From 59 stores earlier this year, Metcash now has only about 12 stores left to sell as years of poor trading conditions and sales declines led to its financial backers refusing to extend further credit.
"If I had more time and lots more money, something could have been done to save the company. But much has been achieved in the past two years. It did have an impact, but the banks had already spent too much," Mr Dodson said. "Itâ€™s a sad thing."
In 2005, the company boasted sales of about R16bn, but as more and more retailers such as Shoprite and Pick n Pay set up in wholesalersâ€™ traditional markets, sales growth stalled.
As these retailers gained momentum, street vendors and spaza shops that purchased mainly from cash-and-carry-type stores were forced to close.
Analysts have suggested that Massmart began developing its Cambridge store format (catering to the lower end of the market) as it believed there was little or no growth in the wholesale model.
Metcash delisted from the JSE in 2004 in a management buyout worth R1,3bn. In 2010, it announced a raft of fundamental changes that saw it cut more than R600m of debt, re-capitalise and take on a new business model to draw in wealthier shoppers. Many have suggested it was too late.
It converted about 50 of its 138 corporate-owned Cash â€™n Carry and Trade Centre stores into a hybrid model serving wholesale and retailer customers.
However, it was forced to further rationalise last year and sold its franchise division, including Metcash Seven Eleven, and part of its Friendly Distribution division to Shoprite for an undisclosed amount. About 57 more stores were closed to help the company "focus on its core business". Now, a year later, Mr Dodson said the business was winding down "well" and he was confident remaining stores would be sold soon.
Contracts and creditors were being dealt with and only people who opted to take a retrenchment package had been retrenched, he said.
He would remain in the wholesale trading business, Mr Dodson said, but would not give any more details.
Chris Gilmour, an analyst at Absa Investments, said the cash-and-carry business was dying in SA. "At a time it gave small traders access to goods, but now townships are not barren, there are malls, and there is no need for them."
Namibia, GDP registers 2.3% growth in second quarter
23/09/2013 - 11:02
The latest second quarter GDP report released by the Namibia Statistics Agency shows that the economy recorded a slow growth of 2,3% in the second quarter of this year compared to an increase of 12,3% in the same period last year.
Massmart leads retail rally
16/09/2013 - 11:52
Johannesburg - Massmart Holdings Inc., the South African supermarket chain owned by Wal-Mart Stores Inc., is leading the countryâ€™s index of retailers as it heads for the longest winning streak in nine months.
Massmart sales growth slows
12/07/2013 - 10:12
Johannesburg - Massmart, South Africaâ€™s biggest food and goods wholesaler, said sales growth slowed during the first half of the year amid a downturn in consumer spending.
Walmart removes India operations president Raj Jain
08/07/2013 - 08:59
US retail major WalMart recently announced a top level change in its Indian operations with President Raj Jain being replaced by Ramnik Narsey, who is currently Senior Vice-President for Walmart International, with immediate effect.
Costco Q3 profit climbs 19%; to open nine clubs by September
31/05/2013 - 09:48
Issaquah, Wash. -- Costco Corp. reported Thursday that net income for the quarter ended May 12 increased a higher-than-expected 19% on increased sales and member fees. The wholesale club operator earned $459 million in the third quarter, up from $386 million in the year-ago period.