Skip to main content

Choppies pays hefty price for expansion

| International retailers

Choppies Enterprises — the leading supermarket grocery retailer in Botswana — continued with its expansion strategy into the rest of Africa in the year to end-June, but the moves into new territories came with a more than 50% cost to the company’s earnings.

Choppies reported headline earnings per share of 7.25 thebe (about 9.48c) in the period under review, down from 16.92 thebe a year earlier. Turnover, however, increased 24% to 7.4-billion pula, while profit rose 12% to 1.44-billion pula.

CEO Ramachandran Ottapathu said Choppies’s full-year performance had been affected by pre-operative expenses in Zambia and Kenya. He said the company had also incurred losses in Zimbabwe due to depressed economic conditions, which resulted in a shortage of cash in circulation. The knock-on effect had been a decline in purchases per transaction.

"Our operations in Zambia and Kenya will remain loss making in the 2017 financial year, as we continue to build our store base and invest in operational infrastructures. In Zimbabwe, we anticipate returning to profitability in the coming year," Ottapathu said.

Choppies, not unlike Shoprite — which is the biggest retailer in Africa — has ambitious growth targets for the continent. The retailer lists its focus as East Africa, with emphasis on Tanzania and Kenya. Shoprite has yet to successfully branch out in East Africa. According to PwC, Kenya and Tanzania are among 10 countries with high potential for retail growth in sub-Saharan Africa.

Consumer spending patterns in these countries are projected to almost double in the next three years, creating more business opportunities for the retail sector, including supermarkets and dealers in electronics and food and beverages.

Ottapathu said Choppies expected to commence operations in Tanzania and Mozambique in the coming months and planned to roll out more than 20 stores in all its regions by the close of the 2017 financial year.

Choppies shares listed on the JSE at R4.90 in May 2015. The share price peaked at R6.50 in December, but has since declined to below its listing price, as conditions in the retail industry have proved to be anything but ideal in Africa.

Choppies shares are down 36% year to date, at R4.09. The retailer declared a gross final dividend of 2.82 thebe.

 

Pin It

Related Articles

Spar reports growth of 3.3% as global retail sa...

SPAR, the world’s largest food retail voluntary chain, has seen annual retail sales break the €40 billion mark for the first time, today reporting global sales revenue of €41.2 billion for the year ending December 31st, 2021. The figures represent...

Informal Retail in Africa: Could Technology be ...

Since the turn of the century and consistently for nearly a decade before the COVID-19 pandemic ravished global markets, Africa was home to the fastest growing economies. The shoots of positive growth it demonstrated afforded it the title of the “...

Consumers need a good reason to shop this Black...

Last year’s Black Friday retail sales massively underperformed for many reasons, according to Marino Sigalas, Account Director at The MediaShop. He says that some consumers were not comfortable with the thought of being shoulder to shoulder with o...

Checkers launches deals onto its Sixty60 home d...

Retailer Checkers says that customers using its Sixty60 home delivery service will now be able to benefit from its Xtra Savings rewards programme.

SA wipe manufacturer Sani-touch is ahead of the...

In the UK a government minister is calling for a new law to ban wet wipes that contain plastic. Labour minister Fleur Anderson argues that around 90% of the 11 billion wet wipes used in the UK per year contain some form of plastic that turns into ...