Shoprite Holdings Ltd has reported group full-year earnings of 141 billon rand or N3.86 trillion for its financial year ended July 2017 with sales from Nigeria and Angola, two of its key markets outside South Africa contributing strongly to group sales.
The company recorded significant growth in naira sales, despite recession that hit the country last year. Analysts however believe that Shoprite’s dominance in essential commodity sales and move into the sales of mainly local products helped it weather the stormy economy.
Even though the South African based retailer did not release its exact sales figures for Nigeria, it announced that it grew its naira sales in the country by 48.2 percent in the year to July 2, 2017. Shoprite also announced that it increased its customer numbers in the country by 38.2 percent in the year to July 2017.
“Supermarkets outside South Africa, which trades in 14 countries in the rest of Africa and the Indian Ocean islands, again produced healthy results. The 308 outlets generated sales of R24.8 billion (N682 billion), 11.7 percent higher than the corresponding period (52 weeks: 13.5%). Angola and Nigeria continue to be the top performers, despite a shortage of foreign currency in these oil-producing countries,” according to a statement by Shoprite released yesterday.
Throwing light on its Nigerian operations, Shoprite noted that “Restrictions on key imported lines remained a challenge in Nigeria, but through a focused marketing drive on local products ,we managed to generate a 48.2 percent sales growth (52 weeks: 50.2%) in local currency,” the retailer said.
“Notwithstanding the trading difficulties, the customer base remains healthy, with the Group’s supermarkets in Nigeria increasing customers by 38.2 percent.”
The company also said that local products now make up 80 percent of its sales in the country, a boost to local manufacturers and the quest to promote “Made-in-Nigeria” goods locally and internationally.
Shoprite has 23 stores in Nigeria, with a further two under construction.
Shoprite said Nigeria holds significant growth potential for the Group, despite short-term issues, including the oil price, a devaluing currency and the ban on certain imports to stem the outflow of dollars.
Headline earnings per share, which exclude one-time items, rose 12 percent to 10.07 rand, the Cape Town-based company said in a statement.
The shares rose 2.5 percent to 206.08 rand as of 9:23 a.m. in Johannesburg, extending the year’s gain to 20 percent and valuing the company at 123 billion rand ($9.4 billion).
We believe there is room for further growth as we continue to improve efficiencies and profitability, both in South Africa and beyond the country’s borders,” Chief Executive Officer, Pieter Engelbrecht said.
With a growing urban population seeking greater convenience and comfort while shopping, and with many state governments keen to modernise trading standards, modern grocery retailers and non-grocery retailing in addition to internet retailing have posted strong growth rates, says Euromonitor in a report on Nigeria’s retail market.
“We have been holding on, in spite of recession. We have managed to hold on to our ground by doing aggressive promo that is helping people come back to SPAR. We also have plans to do more innovative promos,” SPAR Nigeria marketing manager, John Goldsmith told BusinessDay on the phone recently.
Nigeria’s 182 million population, which is growing at 2.6 percent rate per annum, provides a boost to retail stores. Urbanisation has forced many to major cities, raising patronage for products sold at such stores, while the convenience for buying household needs at a one-stop shop is fuelling demand for retail stores.
In 2012, the United Nations Organisation (UN) put Nigeria’s urbanisation rate at 51 percent, suggesting that over 80 million people live in the cities. The UN says this number is growing at an annual rate of 3.5 percent.
Nigeria’s monoproduct economy was hard hit by oil price lows which have cut government revenue by 50 percent and reduced household incomes and expenditure significantly.
The retail sector is driven by Nigeria’s middle-class estimated at 25 to 30 percent . Most of the goods bought from retail stores are food and on-the-counter products, according to a multinational company supplying food products to one of the online stores.
The success of retail stores mirrors the boom of online shops dominated by Jumia, Konga, Payporte, Kara and DealDay.
“Nigerians are getting more comfortable shopping at retail shops. We did our best last year, but it wasn’t as expected. However, there is much competition now than, say, in 2015,” a manager at a retail store in Lagos said on the condition of anonymity.