If you think you’ve got a tough boss, spare a thought for Massmart’s Mitch Slape, who needs to make good on parent Walmart’s $2.4bn investment in the retailer in 2011 (worth just $409m today). There was little lockdown flattery in its first-half numbers — sales up just 4.4% to R41.3bn amid an overall R1.07bn loss, even though trading profit came in 267% higher, at R444m. He spoke to the FM.
Have the results taken some pressure off you, as far as Walmart goes?
MS: Walmart is a demanding shareholder no matter what. It expects results and I think that as long as I am here in this position, that’s always going to be the case. I have a clear mandate from the board and the shareholders to do the things we’re doing, to simplify and clarify the business, and we’re executing against that in a very methodical way, so Walmart’s pleased about that. But the feedback I get is: we want more and we want it faster, please.
But can you give more and faster?
MS: I believe that faster would be tough — and I’ve been through a variety of different turnarounds. I think we’re working at quite impressive speed, especially considering the circumstances that the world is under. I think that the "more" right now is zeroing in on the Game business to [get it to] profitability.
You talk about the "relay" of 64 Game stores and how that is helping the brand. What is that exactly?
MS: In a very capex-light way, we are changing around the adjacencies in-store, we are adjusting assortment, we’re modifying lighting, putting some paint on the walls, and we’re giving the store a refresh. You know that it’s a business that has been tired for a while, so the process is straightforward and it’s to give our customers the sensation that this is a business that is changing to become more relevant.
Those stores had double-digit growth in basket size, but is Game really worth sticking with? Detractors say it just doesn’t know what it wants to be.
MS: As I said at the results presentation, what Game is today didn’t happen overnight and it’s going to take us some time to get to a much better place. But I believe that for the core customer in Game, the customer that we’re trying to reach — usually not an analyst working in Sandton — they’re making R15,000 or less a month, and our metrics are telling us that we’re reaching them. And that we’re being successful. But we’ve got a lot more to do. I don’t want to paint a picture that we’re happy with where we’re at, because we’re not. But I can see the green shoots.
You talked about a "white-space market review" at your results, like the wholesale market which you believe is worth R11bn-R18bn. What does this mean for you?
MS: We had a complex business, we’re working hard to simplify it, and to bring those elements that we know we’re not going to make a dent in so that we can invest in things that are really good. We see a lot of opportunities to lay down more Builders stores, more wholesale stores, grow e-commerce. That’s where we want to spend our time and energy. Previously, we were spending it in the wrong places, in my opinion.
The OneCart acquisition — does that get you properly into the e-commerce game? Because it seems you aren’t?
MS: That opinion is held out there by many but the truth of the matter is, if you take our e-commerce presence and you combine Builders [and] Makro, we’re actually No 2 in the market in SA in terms of merchandise value and traffic. We’ve consolidated our e-commerce team into one, it’s led by a fellow who came over from Walmart US, and now what we’re trying to do is put in place digital building blocks to really grow that business rapidly, and one of those building blocks is OneCart.
There’s one argument that Walmart should have just taken out the minorities at a much cheaper level than its entry price, to fix the business in private. Would that ever happen?
MS: What’s interesting is that even without doing that, Massmart is fixing itself. That’s what we’re doing; we’re just having the privilege of doing it in full public view (laughs). I am not in a position to comment for Walmart, but the plan is the exact same plan we would execute whether we were a private company or a public company.
At what point would Walmart throw in the towel and exit?
MS: We just had our board meeting this week and we had our Walmart board members in town, and they’re happy with the progress we’re making. Their view is: we’re ahead of where we were six months ago, as we are from 18 months ago. So we’re making progress, "Keep it up … keep on pushing — you have our full support." So I have no indication from Walmart other than full commitment and please move faster and do more.
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