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Shoprite ends Kenya expansion, plans retreat from the country

Leaving the East African country after opening its first store there more than two years ago.
Image: Dean Hutton/Bloomberg

Shoprite Holdings plans to sell or close its remaining two stores in Kenya by the end of December, leaving the East African country two years after entering it.

The supermarket group has been reviewing its long-term options in Africa as currency devaluations, supply problems and weak consumer spending in Angola, Nigeria and Zambia have weighed on earnings.

“Kenya has continued to underperform relative to our return requirements,” the company said on Tuesday as it posted a 16.6% rise in annual group earnings, adding its decision to leave had been cemented by the economic impact of the Covid-19 pandemic.

Shoprite shares jumped more than 11% to a five-month high as investors cheered the group earnings, post-lockdown outlook and dividend.

The decision to leave Kenya comes a month after Shoprite said it was considering selling its stake in its Nigerian subsidiary.

As part of the ongoing Africa review, the firm has renegotiated 48 rental agreements by either reducing rent payments or converting them to local currency, Chief Executive Pieter Engelbrecht told analysts.

The firm has also restricted capital allocations to its supermarkets outside South Africa.

Shoprite, with more than 2,300 stores across Africa, reported record sales of R156.9 billion, up 6.4% for the year ended June 28, with like-for-like sales up 4.4% as customers spent more at its discount Usave and mid-to-upper market Checkers stores.

Sales at its loss-making rest of Africa operations declined 1.4% as “complexity in managing Covid-19 regulations across multiple territories negatively impacted the second half,” it said.

Diluted headline earnings per share (HEPS) from continuing operations climbed to 765.8 cents against a restated 746.9 cents a year earlier, while adjusted diluted HEPS rose 16.6%.

Shoprite declared a final dividend of 227 cents per share and said it had traded ahead of expectations since the beginning of July.

Read the sens announcement here

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Doing very well in very challenging times.

Africa is not for sissies, South African businesses will burn…

If it is difficult to do business in the rest of Africa or elsewhere,
bring the money back home and increase your dividends (support your investors).

The standout retailer in the sector is Clicks, without a branch outside the country. The dreams of a huge (thanks, Donald!)growth market out there in Africa have turned to nightmares for even the most efficient local businesses.

You will find that their (Clicks) strategy is not to enter Africa but focus on townships in SA instead. Recent bad press won’t do them favours, but that’s where their focus is.

An interesting picture is painted by the growth and flattening of sales in the 3 different stores, namely; Shoprite (Flat), Checkers (Growing) and USave (Growing). The rich are getting richer and the poor are getting poorer.

The consumer is the biggest loser when Shoprite disinvests. No retailer can compete with the efficiencies of Shoprite. Shoprite serves the consumer with the best product at the best price. If they don’t see an opportunity in a country, then Donald Trump’s statement about African countries is proven correct. It is challenging to be a capitalist on a socialist continent.

…. right product, right price, right time.

SA companies and monies were used to market Africa as open for business, safe for business with potential of great growth and gains. The sad part is SA companies forgot that that their power was limited compared to other countries like USA, Europe and Asia.
We were used and when we were no longer of any value they kept on being forced out by many court cases and charges. Some of the charges did not make much sense like Nigeria. If the government can’t provide her own people with traceable residential addresses, how did they come up with the reason and the amount that they charged MTN eroding the MTN value for South Africans!

End of comments.

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