Massmart Profit Slump on the Verge of Ruining the South African Firm

Massmart Holdings Ltd started consulting with unions concerning job cuts and store closures as the South African unit of Walmart Inc struggles to recover from an earnings slump.

“About 1,440 employees could be affected,” the Johannesburg-based company said in a statement. The shares climbed 5.5% to 51.51 rand as of 3:13 p.m. in the South African city, the biggest gain in more than a month.

The plan is to shutter the 23-store Dion-Wired chain of hi-tech appliance shops and 11 Masscash wholesale outlets, a spokesman said by phone on Monday. Employees and the South African Commercial, Catering and Allied Workers Union have been informed and the process may take at least two months, he said.

Massmart cut its full-year dividend by 40% last year and scrapped its interim dividend. The stock has more than halved in value over the past 12 months, the worst performer of the 13 stocks on the FTSE/JSE Africa General Retailers Index.

Massmart has a total of almost 450 stores across 13 countries in sub-Saharan Africa and about 48,500 full-time employees.

The move marks the first significant act by Massmart’s new chief executive officer, Mitchell Slape, who arrived from Walmart in September with a brief to turn around the retailer. The company, which also owns the South African chains Game and Makro, slumped to a loss in the first half of last year as shoppers stayed away amid an economic downturn.