SHOPRITE is planning to withdraw from the Uganda and Madagascar markets, it said yesterday after announcing an 8.1 percent increase in total merchandise sales from continuing operations to R168 billion for the 53 weeks ended July 2021.
Shoprite, Africa’s retail giant, is adding to its list of exits after selling its Nigerian business of 15 years and closing Kenyan stores in March.
“In line with the group’s non-RSA review process, our operations in Madagascar and Uganda have been classified as discontinued,” said Shoprite.
The group operates 10 stores in Madagascar and has five branches in Uganda, employing 300 Ugandans.
Commenting on the exit, Peter Hirst, senior analyst at Euromonitor International, said Shoprite was leaving Uganda in line with the company’s review of its long-term ventures across Africa over the past year as currency devaluations, lower commodity prices and high inflation have impacted household disposable incomes negatively.
Furthermore, the exit comes as footfall has decreased significantly in Shoprite outlets as Ugandans reverted to ”buying local” in 2020, resulting in under-performance in the five outlets across the country.
“This trend benefited traditional grocery retailers, which boast lower average unit prices, providing relief to a struggling consumer base,” Hirst said.
He said the rise of online shopping, which drove shoppers away from traditional brick-and-mortar outlets like Shoprite, and the significant costs incurred by the company to adhere to the Covid-19 pandemic may have been the final nail in the coffin.
“Sources suggest operations will be acquired by Majid Al Futtaim, franchise holder of hypermarket chain Carrefour, which launched its first outlet in Uganda in late 2019 and has shown strong growth since,” said Hirst.
A year ago Shoprite began a review of its supermarket footprint outside South Africa, saying it would close stores and negotiate rent reductions as currency devaluations and tough trading conditions outweighed benefits from the continent.
Equity analyst at Noah Capital, Zinhle Mayekiso, is of the view that the company’s non-RSA operations are demanding a lot of management’s time, especially given the various challenges in frontier markets.
“In our view, Shoprite’s centralised and streamlined capital allocation decisions will help it achieve a better operational momentum as it increases focus on its core South African business and ensures a renewed focus on returning cash to shareholders,” Mayekiso said.
Shoprite, which operates the Checkers, Usave and Shoprite retail outlets, said South African supermarkets, excluding LiquorShop, achieved sales growth of 9.7 percent during the period.
It said Checkers and Checkers Hyper reported sales growth of 10.9 percent, notwithstanding the high base reported for the second-half period last year.
Shoprite said the furniture segment, made up of OK Furniture and House & Home, increased sales by 24.6 percent.
Shoprite and Usave reported sales growth of 8.8 percent during the period and the group’s LiquorShop sales increased by 4.4 percent. Shoprite said growth in the liquor business was significantly impacted by the mandated liquor trade closures forming part of Covid-19 lockdown regulations.
South African supermarkets opened a net of 87 stores, while non-RSA supermarkets continued to operate in regions challenged by macro-economic and consumer affordability constraints, exacerbated by the impact of Covid-19 restrictions.