- Posted by: Julien Garcier
- Categories: Angola, Nigeria, Retail, SagaRetail, Supermarkets
South African grocery retailer Shoprite continues to struggle in sub-Saharan Africa (SSA), with Nigeria replacing Angola as its worst performing market in the region. While sales in Angola are now almost stable, declining at an annual rate of 1.9% in constant-currency terms during the six months to December 2019, Nigerian sales plunged 8.1% over the same period.
The main factor behind this weakness in Nigeria were September’s anti-South African riots, which continue to disrupt footfall at some of its local malls, in addition to an ongoing shortage of foreign-currency and the tightening of import restrictions on such staples as rice, which is making it increasingly difficult for Shoprite to keep its stores fully stocked.
Shoprite’s like-for-like or same-store sales in SSA declined by 7.4% during the six months to December 2019, while its trading profit plunged by 62.3%, to ZAR58 million (USD3.8 million), squeezing its trading margin in the region to a mere 0.5%.
In response to this, Shoprite closed four unprofitable SSA stores during 2019, trimmed the number of new stores planned for the 12 months to June 2020 from 17 to 13, secured rent reductions for 17 of its premises (with a further 16 currently under re-negotiation), and moved to “de-dollarise” rents and borrowings. Moreover, it said that it is examining “alternative operating models and structures” and may dispose of some of its property assets. These “alternative models and structures” likely include franchising and cash-and-carry stores, both of which it has extensive experience of in Southern Africa but has until now hesitated to utilise further north.
The Sagaci Research View: While it now appears to be over the worst in Angola, Nigeria’s difficult business environment remains a cause for concern, and franchising could be a way for Shoprite to reduce its exposure to whims of the Nigerian government while retaining a foothold in a market that undoubtedly has huge long-term potential.
To view Shoprite’s results presentation for the first half of its 2020 fiscal year (the six months to December 2019), click here
If you want a deep dive into Shoprite’s SSA operations, strategy, and performance, you may be interested in our Shoprite Retailer Research Report