Shoprite is exiting the continent’s most populated country, Nigeria, after 15 years of operation. The retail giant initiated a formal process to consider the potential sale of all or a majority stake in its supermarkets in Nigeria.
This was disclosed in a trading update statement for the 52 weeks to 28 June 2020 released on Monday.
In the statement, Shoprite said the results for the year do not reflect any of their operations in Nigeria as it will be classified as a discontinued operation.
The statement read in part:
“Following approaches from various potential investors, and in line with our re-evaluation of the Group’s operating model in Nigeria, the Board has decided to initiate a formal process to consider the potential sale of all, or a majority stake, in Retail Supermarkets Nigeria Limited, a subsidiary of Shoprite International Limited.”
“As such, Retail Supermarkets Nigeria Limited may be classified as a discontinued operation when Shoprite reports its results for the year. Any further updates will be provided to the market at the appropriate time.”
Given the aforementioned comment regarding the pending classification of Nigeria as a discontinued operation, Supermarkets Non-RSA (excluding Nigeria) contributing 11.6% to Group sales, recorded a decline in sales of 1.4% for the year from 2018.
However, South African operations contributed 78% of overall sales and saw 8.7% rise for the year.
Second half constant currency sales growth of 6.3% was significantly impacted by lockdown regulations across the 14 African countries in which we trade.
Lockdown restrictions pertaining to store closures; social distancing; transport restrictions; the movement of people; trading hours; workforce limitations and trade in alcohol impacted various regions to differing degrees at different times.
South African retailers have struggled in the Nigeria market.
The company entered the Nigerian market in 2005 and its exit continues a trend of South African retail business struggling in Africa’s most populated nation.
Mr Price, another South African retailer, announced plans to close its Nigerian business in June.
In 2014, South African retailer, Woolworths, also pulled the plug on its Nigerian operation, citing high rents and duties, as well as marketing difficulties.
In 2012, Shoprite announced plans to spend up to $205 million on securing new locations in Nigeria. The supermarket chain went on to spread its tentacles across most of Nigeria’s largest cities.
In 2016, the Nigerian economy suffered a recession, severely affecting consumer spending power and foreign exchange reserves.
In 2019, Brand Spur reported that Shoprite Holdings in Nigeria lost 8.1% of its sales in constant currency terms at the end of the second half of 2019 due to September’s Xenophobic attacks and reprisals back in Nigeria.
Shoprite’s expected closure in Nigeria comes amid the coronavirus pandemic, which has forced economies across the world into a slump and devasted entire industries.
This operational update is inclusive of voluntary earnings per share (EPS) and headline earnings per share (HEPS) guidance, is more comprehensive than usual for the purpose of providing shareholders and investors with an understanding of how the Group has traded during the COVID-19 pandemic.
Despite difficult circumstances, in a year incorporating the COVID-19 lockdown and accompanying regulations governing trade, transport and operations, the Group increased total sale of merchandise for the 52 weeks to 28 June 2020 (including the impact of hyperinflation in the prior year) by 6.4% to approximately R156.9 billion. Like-for-like growth for the year was 4.4%.