Monday, February 26, 2024

Will Choppies stock rally last?

Choppies stock rallied in the past two trading days following a jump in profit, calming investor nerves that have been edgy about the company’s geographic expansion as well as strikes that have affected the retailer recently.

In its delayed interim financials for the period ended 31 December 2017, the grocery retailer’s revenue surged 22 percent to P5.8 billion in the last six months, up from P4.7 billion in the same period last year. Net profit also jumped 22 percent to P68 million, up from P56 million.

The results landed while Choppies is facing multiple frontal attacks that mostly have to do with strikes concerning wages. In South Africa, the Botswana native company had to deal with strikes in the North West that affected operations, with some shops vandalised and looted. While grappling with that, the Food and Allied Workers Union said Choppies should prepare itself for a strike after meditation between the company’s management and union failed after the union had demanded a minimum pay of R4, 000 for Choppies workers or a 10 percent increase in wages, whichever is great.

The strike in South Africa was on the back of another strike at one of Choppies stores in Botswana, where workers downed tools for better working conditions. The Batswana workers who participated in the strike have since been dismissed from work for what the company terms “illegal strike.”

The unfolding events did not dampen investors’ enthusiasm that followed the release of the financial results. Investors for quite some time we weary of Choppies’ costly expansion that was not delivering the expected results: the grocery retailer’s profit has been on a downward trajectory due to the expansion. Investors showed their displeasure as stock price slid both in the BSE and JSE last year. Now with results signalling that the expansion is starting to bear fruits ÔÇô recording the first profit in South Africa after 10 years it expanded there- investors sent the stock climbing as early as Thursday last week when results were announced.

The dual listed retailer, with the primary listing on Botswana Stock Exchange and the secondary listing on the Johannesburg Stock Exchange, saw its shares rise from R2.40 on to the current R3.30, up by 37.5 percent. The BSE which took time to digest the news saw Choppies rally on Monday, ending this week to trade at P2.48, up by 13.2 percent from P2.19.


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