Shoprite Eases Africa Push to Focus on Domestic Market Gains
(Bloomberg) -- Shoprite Holdings Ltd. switched its focus firmly toward taking market share in its home market of South Africa, after opting to withdraw from Nigeria and Kenya and move more cautiously in Angola.
The more guarded approach comes after the continent’s biggest supermarket chain struggled with supply disruptions and getting money out of some countries. The company is seeking to take advantage of its increased dominance of the South African grocery industry in a year blighted by coronavirus lockdowns.
“The business remained vigilant, combating the challenges faced across Africa, however, currency devaluations again eroded much of our efforts,” Chief Executive Officer Pieter Engelbrecht said Tuesday. “From here, our capital allocated to the region remains at a minimum and we continue to manage costs as best as we can.”
Despite leading the growth trail into Africa for years, the Cape Town-based company’s difficulties on the continent mirror several other South African retailers that have pulled back, most notably in regions beyond their immediate local borders. Shoprite’s Angolan revenue declined by 16% in local currency and by 40% in rand terms in the six months through Dec. 27, it said.
Sales at the South African supermarkets business, which accounts for the bulk of income, climbed 5.6% in the first half. Shoprite has been able to offer affordable prices to increasingly cash-strapped consumers, while also luring wealthier shoppers through the expansion of its niche and fresh-food offering and the Checkers Sixty60 one-hour grocery delivery application.
“There is still a lot of opportunity to capture the upmarket segment,” Engelbrecht said by phone.
This will come from both the FreshX stores, which have 1.3 times higher sales growth than the Checkers average, as well as smaller format neighborhood stores in wealthier suburbs. The company has opened less than half of the 80 planned FreshX outlets and only three of the neighborhood stores, “so there is lots of growth to come out of that,” Engelbrecht said.
The shares climbed 4.4% to 151.64 rand at the close in Johannesburg, the highest in more than 19 months. In the past year, Shoprite’s stock gain has been almost double that of the 26% advance in the FTSE/JSE Africa Food & Drug Retailers Index.
©2021 Bloomberg L.P.