The difficult times are haunting the local retail sector but the giant mass retailer, Choppies, chooses not to be derailed from its strategy of creating a strong African supermarket business. It declared in its newly released financial results that it is currently in talks to acquire a further eight stores in Kwazula Zatal (KZN) in South Africa. This follows the establishment of businesses in Tanzania and Mozambique in the past year.
“If concluded, will be complementary to our current business and will bring significant operating synergies,” says the retailer. The current total store count sits at 217 from 183, increasing its retail space by 21 percent. The retailer says the expansion is in line with its long term growth strategy. In total Choppies has a presence in seven African countries, this in comparison to its local competitors sets it apart.
The half year results reflect the tough operating environment in its mature country markets such as Botswana, South Africa and Zimbabwe which despite the overall growth in revenue realised a lower profit. The profit declined by about 29 percent from the previous corresponding period.
“The 2016 operating results benefited from the profit on sale of an aircraft of P20m and higher realised foreign exchange gains of P31m compared to the current financial year. Excluding these two items, group operating profit improved by 28%,” says the retailer. The sale of aircraft was done in the local market as indicated in the results. This suggests that unlike the previous year the retailer suffered the pains of the difficult market conditions without the cushion of a once off cash injection.
Specific to Botswana the mass retailer says that it maintained its market share on the backdrop of the challenging economic conditions. The South African market also isn’t sparred from the hard times but it seems from the results that it had somewhat of a robust performance compared to Botswana.
“North West region stores achieved a like for like growth of 31% and broke even in the last quarter of the year. The continuation of this trend will result in an improved performance for the region. KZN performed well under the prevailing difficult trading circumstances, showing a like for like stores growth of 18% compared to the same period operated in FY16 (2016 financial year),” says Choppies. The same cannot be said about the Zimbabwe market which the retailer says its depressed economic conditions were exacerbated by a shortage of cash in circulation. It adds though that a revenue growth of 14 percent was experienced owing to management focus.
Without a doubt the past bullish performance that Choppies had become synonymous with has faded off. This points to the tough times experienced by many of the consumers, who in the case of Botswana, are bearing the discomfort of stagnant personal incomes. This and other pressure points put mass retailers such as Choppies to the test in their ability to ride the waves.