This is why Walmart is sending an American heavy hitter to fix Makro and Game

Helena Wasserman , Business Insider SA

May 23, 2019, 12:37 PM

Mitch Slape, the new CEO of Massmart. Photo: Walmart

Walmart is sending a senior executive to head its South African business, Massmart.
Mitch Slape has extensive experience in markets as diverse as Japan, Mexico and India.
On Thursday morning, Massmart's share price plummeted 10% after the company warned that its profits would halve.
For more, go to Business Insider SA.

Two weeks after its South African CEO resigned (no reason given), Walmart has appointed an American fixer to head Massmart, which owns Builders Warehouse, Makro, Game, Jumbo Cash and Carry and Dion Wired.

Described as a “Walmart old hand”, the 52-year old Mitch Slape has been with the US giant for almost a quarter of a century.

For much of that time, he has been involved in Walmart’s businesses outside of the US.

Fluent in Spanish, Slape ran a Mexican Walmart-owned supermarket chain, before becoming chief operating officer of Walmart’s Indian chain. He then led all mergers and acquisitions for Walmart’s international stores before becoming involved in trying to turn around the struggling Japanese chain Seiyu.

That experience will come in handy in South Africa, where Massmart has been a big disappointment for Walmart. The US retailer bought Massmart in 2010.

Ouch! After 8 years, the boys from Bentonville have seen the US$ value of their investment in Massmart decline by ~80%. pic.twitter.com/XXVhpPuXiS
— Sean Ashton (@SashtonSean) May 23, 2019

While Massmart remains a dominant force - it controls almost 40% of the local market for household appliances - in the past year alone, its headline earnings declined 23%.

On Thursday, its share price tanked 10% - wiping out almost R2 billion in a morning – after warning that its earnings for the current six months will be at least 50% lower than last year. Sales growth at all of its retail stores are sluggish, and were below 4% for the first twenty weeks of its new financial year.

Massmart's share price. Source: Sharenet

This is mostly due to the tough economy, where unemployment, high fuel and electricity prices and weak growth have hit retail sales. Earlier this year Massmart management quoted FNB data that showed that 56% of middle-income consumers in South Africa spent their entire monthly salary in 5 days or less after receiving it.

Increasing competition on price, particularly from Pick n Pay, and the rise and rise of Takealot, contributed to its woes.

Game and Dion Wired seem to be a particular problem for Massmart. Their trading profit plummeted form R374 million to R33 million in the past year. But in its latest trading update, it looks as if sales have also slowed at Builders Warehouse.

Judging from Slape’s approach at the Seiyu chain in Japan, he will focus on growing online retail and revamping stores.

But don’t expect your local Makro to start looking like a Walmart.

"We learned very early in the process that you simply can't take a superstore in the US, pull it out of the ground and plant it in another country and expect that to be a successful strategy," says Slape told The Guardian. While the “back end” of Walmart’s stores across the world increasingly look alike in terms of systems and logistics, the "front end" remains local.

"From the customer point of view, it might appear to be a certain brand," says Slape. "But everything that is 'back of house' – systems, processes, buying – we can leverage a lot of that globally."

Slape received his Masters of International Finance from Thunderbird School of Global Management in the American state of Arizona and his Bachelor’s Degree in Finance from Wichita State University in Kansas.