Shoprite reveals sale, exit from Kenya marketTuesday September 08 2020
South African retailer Shoprite is set to fully exit the Kenyan market barely two years after launching local operations, citing the underperformance of its supermarkets.
The retailer said it will close or dispose of its two remaining stores — Westgate Mall and Garden City — before December, shedding hundreds of jobs.
Shoprite, which is retreating in countries outside South Africa, in April closed its Karen branch in Nairobi and shut the City Mall branch in Nyali, Mombasa.
It attributed the shutdowns to reduced flow of shoppers.
“Most likely we will be out of the [Kenyan] market by the end of the calendar year, meaning December, either by closing or disposing,” said Shoprite CEO Pieter Engelbrecht during the live cast presentation of the retailer’s results.
“Kenya, with three stores at year-end, has continued to underperform relative to our return requirements. Post year-end, one store has been closed given the ensuing economic impact of Covid-19,” the retailer added in a notice to shareholders while releasing financial results for the year to June.
Shoprite, which has 2,300 stores across Africa, reported a 6.4 percent rise in sales for the year to June.
The company posted a R28.2 million (Sh1.8 billion) loss for its business outside South Africa, partly attributed to the losses from the Kenya stores.
“Supermarkets Non-RSA’s R28.2 million trading loss showed a marginal improvement on last year. However, [this] was notably impacted by the loss in our Kenyan business, the negative impact of restrictions and store closures due to Covid-19 and a R106.2 million reduction in interest income earned on government bonds and bills,” said Shoprite in its financials.
Its Kenya exit plan comes amid increased competition from cash-rich retailers such as Naivas, Quickmart and Carrefour in a sector where local ones such as Tuskys are struggling with lower sales and mounting debts.
When setting shop in Kenya, Shoprite said it was taking advantage of the disarray in Kenya’s retail sector.
Two of the country’s three top retailers Uchumi and Nakumatt were in trouble, with the former having closed stores. Former regional leader Nakumatt collapsed.
Shoprite had planned to open seven stores in Kenya, including six in Nairobi.
“Retail in Kenya currently is in total disarray... we could now go in and secure seven premises without paying anything other than agreed rental,” Shoprite said ahead of the Kenya entry.
Shoprite was an anchor client at Karen’s Waterfront Mall and Nyali’s City Mall.
The billionaire Muguku family, which owns Waterfront Mall, has sued Shoprite and is seeking Sh520 million in lost rent after the retail chain cut short its tenancy.
The decision to exit Keya comes a month after the South African retailer said it was considering reducing or selling all of its stake in its Nigerian subsidiary.
Shoprite, 17-per cent owned by retail tycoon Christo Wiese, has grown from eight supermarkets in 1979 to a no-frills mass-market grocer with operations in 15 African countries, including two stores in Uganda.
The company has been reviewing its long-term options in Africa as currency devaluations, supply issues and low consumer spending in Angola, Nigeria and Zambia weigh on earnings.
In February, Mr Engelbrecht told analysts that Shoprite remained committed to the continent but not at any cost.