February 24, 2016

Shoprite Reports a Positive African Performance Despite Challenges

Dolapo Omidire

Shoprite Holdings reported that sales increased by 15.2% and by 23.5% in constant currencies within the 14 countries outside South Africa they operate in. This positive performance comes in the midst of rising costs put together with the currency and import related challenges commodity reliant economies including Nigeria, Angola and Zambia have been facing. For their non South African supermarkets, store rentals grew by 42.7% due to dollar rents and their electricity and water tariffs increased by 34.4%.

Shoprite CEO, Whitey Basson speaking on the Shoprite Holding’s interim results for the Six Months to December 2015 and their corporate strategy explained that:

“The economies of the oil-rich Angola and Nigeria in particular showed surprising resilience despite the challenges brought about by the steep drop in the oil price…”

In the midst of import restrictions and FOREX shortages, 4 new supermarkets were opened in Nigeria with 4 more planned for the second half of the year. Even with the economic challenges brought on by the low oil price, the IMF still forecast Nigeria and Angola to grow their economies by 4.1% and 3.5% respectively in 2016. In Shoprite Holding’s June 2015 Year End Financial Statement, it was shown that Nigeria’s sales were up 19.7%.

In the Analyst Presentation for the interim results published, Shoprite explained that import and currency restrictions affected product availability and new exchange legislation impacted speed of property developments and mall occupancy levels. Nonetheless, Africa’s largest economy showed healthy sales growth.

Shoprite chose to focus on new supplier development, while reiterating their long run interest in Nigeria because of the size of her population and economy within Africa.

76% of products are now sourced locally from 250 suppliers and farmers. A distribution centre in Lagos which was recently secured will also improve product availability.

Other countries where Shoprite has operations including Zambia and Angola showed strong performance even with supply line challenges and more red tape.

Shoprite Stock en route to Solwezi, Zambia
Shoprite Stock en route to Solwezi, Zambia

While falling copper prices led to 10,000 mining job losses in Zambia, Shoprite believe they are well positioned as the low price leader in a high inflation environment. Shoprite plan on opening 5 new stores in this region before June.

In Angola (the largest Non‐South African sales contributor) a new store in Palanca is expected to open in April and this is expected to be the highest turnover store in the Group.

View the results.

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