Choppies Enterprise Limited says the group’s operating margins were negatively affected by the costs of establishing in new geographical locations and opening new stores and distribution centres. The company said in its audited financial results for the year ended 30 June 2016 which were published this week. The group has during the year commenced operations in Zambia and Kenya with the opening of five and eight stores respectively and established distribution facilities adding that it expects operations in these countries to remain loss making in the 2017 financial year as it continues to build store base and invest in operational infrastructure. In the statement, Choppies CEO, Ramachandran Ottapathu said the group strategy of creating a strong African supermarket business moved forward at an accelerated pace during the past year culminating into establishment of Zambia and Kenya businesses.
Choppies had previously set itself a target of 200 stores by the end of 2016 calendar year and on Thursday Ottapathu affirmed in an interview that they will achieve that feat by the end of the year in three months’ time. The group had by Friday commenced operations in Tanzania by opening one store in that country and added one store in Botswana taking its total stores to 185, with only 15 left to reach the target. Ottapathu said they will start operation in Mozambique in November with one store and will add more as time goes on. He said next year they are targeting to open 20 stores which will include operations in Namibia. Choppies, which in the reporting period had 183 stores in five countries with the majority in Botswana at 79, saw its revenue going up by 24 percent from the previous corresponding period to P7.4 billion from P5.9 billion.
Choppies profit for the year however dropped to P104 million from P197 million registered in 2015. In Botswana, where Choppies runs 79 stores after adding six new stores during the year, despite challenging economic conditions, the local operations traded well and maintained market share. “The continued devaluation of the Rand put downward pressure on prices and thus revenues. EBITDA increased by 7 percent after increasing by 1 percent, due to an increase in the depreciation charge related to the Botswana operations,” said Ottapathu. The South African business, other than the newly acquired Jwayelani, is reported to have incurred losses occasioned by very depressed trading in areas dominated by mining. However, focused management action is said to have resulted in an improvement in sales and margins and early indications are that the actions will advance South Africa to improved results.
Losses were further incurred in Zimbabwe due to depressed economic conditions, which have resulted in a shortage of cash in circulation causing customer purchases per transaction to drop markedly. The group believes there is strong desire in that market for customers to buy at Choppies and therefore anticipates a return to profitability in the coming year following renewed management focus which has resulted in improved margins in recent months.