We analyse Massmart (MSM) management’s turnaround plan and believe the simplification of the structure into a Retail and Wholesale division could lead to several issues, as they straddle different product groups and income segments. We think significant additional benefit is unlikely to flow from this new operating model and show Game’s “Back to Basics” strategy contains elements previously attempted without significant yields gained. In our view MSM’s “Wholesale route to market” strategy does not account for the changed profile of the wholesale customer that is now driven primarily by price. Lastly, we show the drivers of MSM’s high cost growth which resulted in a significant increase in its expenses to sales ratio over the past decade.
