RetailAnalysis
15 March 2017
Choppies H1: revenue up 34%

Botswana-based Choppies has announced first half results saying revenue rose 34% to BWP4.7 bn (US$445.4m), driven by a 37% increase in stores, to 202, and a 36% increase in selling space, to 290,968 sq. m.

Performance aided by like-for-like sales growth

Like-for-like sales rose 3.0%, which the retailer said was driven solely by an increase in basket size, with footfall remaining flat on the year. However, the positive top line performance was offset by fall in EBITDA margin, which fell to 4% from 6% in H1 2016, while its profit after tax margin fell to 1.2%, from 2.9% in the previous year.

By country, Choppies said:

  • Botswana: Revenue rose 1% to BWP2.3 bn (US$218.0m), with flat like-for-like growth. The retailer spotlighted its addition of more value-added services, such as financial services, and products, like clothing, into stores had helped drive revenues. To generate better returns by store, Choppies said that it had undertaken a programme of subletting excess space.
  • South Africa: Revenue rose 121% to BWP1.4 bn (US$132.7m), with like-for-like growth of 22%. Choppies said that its new strategy for the country was driving performance. The launch of Choppies Money, in conjunction with Blu Label, was boosted by the addition of other services, such as Lotto and Standard Bank money transfers, amongst others.
  • Zimbabwe: Revenue rose 19% to BWP697m (US$66.1m), with like-for-like sales contracting by 6%. The challenging market environment affected overall performance, with Choppies noting ‘cash availability, Government policies and product availability still pose challenges in the market’.
  • Other countries: In its final reporting region, which combines its operations in Kenya Tanzania and Zambia, Choppies said revenue rose 34% to BWP235m (US$22.3m), with like-for-like sales growth of 3%. In these countries expansion was the main driver of performance. Nine new stores were added in Zambia, with Choppies saying that it believes it can become profitable with a network of 15.
  • Despite challenges, expansion to continue

    In spite of the challenging environment in some of the countries in which it operates, Choppies remains committed to expanding its presence in the region. The company said it would invest BWP570m (US$54.0m) – BWP120m (US$11.4m) before the end of its 2017 financial year in June and BWP450m (US$42.6m) in its 2018 financial year – to open more stores. Choppies said it expected to add 15 new stores in H2 2017, with a focus on Kenya, Zambia and South Africa, and 48 in its 2018 financial year, with 13 to be added in South Africa and 12 in Zambia.

    Choppies said that in its new markets start-up costs would lead to it generating losses as they expand and invest in operational infrastructure. To help drive growth in east Africa, Choppies has appointed Vijay Kumar, who was previously a chief financial officer at Nakumatt, while he will also be chief executive of Choppies’ operations in Kenya. Meanwhile, in South Africa it said that its operations could break even in 2017 following the acquisition of 21 Jwayelani branded stores in KwaZulu-Natal and the Eastern Cape. It said the acquisition had helped it shift its earnings and reduce its reliance on mining towns.

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