Sunday, October 25, 2020

Sluggish economy chops on Choppies’ profits

With the sluggish domestic economy growth and tough trading conditions beginning to weigh heavily on the different sectors, Choppies Group, the market leading mass grocery retailer in the country, has also reported a downward movement in its Profit After Tax (PAT) for the 12-month period that ended June 2016. 

The BSE-listed retailer’s financials show that its PAT went down by 48 percent from P104 million to P197 million. The group’s revenue went up by 24 percent from P5.9 billion in June 30, 2015 to P7.4 billion in June 30, 2016. Gross Profit, on the other hand, went up by 12 percent from P1.3 billion in June 2015 to P1.4 billion in June 2016.

Apart from the key financial indicators, the Choppies financials also show that the company is not performing well at its South African and Zimbabwean stores which incurred significant losses. 

In South Africa, Choppies attributes the losses to depressed trading in areas dominated by mining but has highlighted that a focused management action has resulted in an improvement in sales and margins. While  trading  conditions  remain  challenging,  early  indications  are  that  these  actions  will  advance  South  Africa  to  improved  results. 

“The  acquisition  of  Jwayelani,  which  trades  in  KwaZulu-Natal  and  the  Eastern  Cape,  was  successfully  executed.  Jwayelani  consists  of 21  stores,  a  distribution  centre  and  a  meat  processing  factory,” reads a statement accompanying the results.

Losses  incurred  in  Zimbabwe  are said to be due  to  depressed  economic  conditions,  which  have  resulted  in  a  shortage  of  cash  in  circulation,  causing  customer  purchases  per  transaction  to  drop  markedly . However, footfall  increased  strongly  demonstrating  the  desire  of  customers  to  shop  at Choppies.  Renewed  management  focus  has  resulted  in  improved  margins  in  recent  months and the group stated that it anticipates  returning  to  profitability  in  the  coming  year in Zimbabwe.

“Our  operations  in  these  countries  will  remain  loss  making  in  FY2017  as  we  continue  to build  our  store  base  and  invest in  operational  infrastructures,” said Choppies CEO Ram Ottapathu this week. 

For the local market, Ottapathu said that the operations traded well and maintained market share despite challenging economic conditions. The company is also looking into penetrating the Zambian  and  Kenyan markets with operations slated to commence  with  the  opening  of  five and  eight  stores,  respectively. 

Meanwhile, a look into the group’s total assets shows an improvement of 18 percent from P2.4 billion in June 2015 to P2.9 billion June 2016.

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