Choppies has reported a 31.8% increase in retail sales for the financial year to end-June, bringing total sales to 8.48-billion Botswanan pula (R11.1bn).
The growth was driven by the opening of 14 new stores, the acquisition of 108 liquor and hardware outlets from Kamoso, as well as inflation and volume growth across the group's operations, according to the company’s annual results report.
The retailer saw volume growth of 17%, despite experiencing challenges in Zimbabwe, where volumes fell. Like-for-like store sales rose 21%.
The gross profit margin, however, fell to 20.6% from 21.1% in 2023, due to increased competitor discounting and the dilutionary effect of acquisition of Kamoso, which operates on thinner margins.
Gross profit increased 28.4% to 1.75-billion pula, despite a competitive retail environment. Expenses surged 30.8% due to inflation, new stores and the Kamoso acquisition.
The retailer said its Botswana operations remained a stronghold, contributing a sales increase of 13.6% to 5.08-billion pula. Volume growth in the country reached 10.1%, with price inflation at 3.1%.
Choppies’ efforts to enhance in-store execution and customer engagement, alongside the implementation of an inventory optimisation system, played a critical role in the improved performance.
Namibia also experienced growth, with sales increasing 39.1% and like-for-like sales by 25.5%. As new stores begin to reach their potential, the group expects further profitability in the Namibian segment.
In Zambia, Choppies saw a 14.9% growth in pula terms and a 48.1% increase in kwacha, as the latter fell 31% against the former due to falling metal prices and Zambia’s debt restructuring efforts.
Adjusted earnings before interest and taxes (ebit) in kwacha terms increased by 50.6%, while in pula terms, ebit grew 69.2%.
Zimbabwe continued to pose challenges. Despite the introduction of the Zimbabwe gold currency in April 2024, the country’s economic troubles persist.
Foot traffic in formal retail stores fell by up to 30% as consumers increasingly turned to the informal sector, which is not subjected to tax compliance.
This shift, along with a weakening exchange rate, resulted in an increase in operating losses in Zimbabwe.
Choppies’ acquisition of a 76% stake in Kamoso, alongside assuming shareholder loans and paying an additional 22-million pula, was a major strategic move.
The acquisition has added retail, wholesale, milling, and manufacturing segments to Choppies’ operations, but is also carrying some debt.
Kamoso’s liquor and hardware businesses saw challenges, particularly with stockouts and stiff competition. However, Choppies has taken steps to rectify the issues, strengthening its middle and senior management teams and optimising inventory levels.
The milling and manufacturing segments were profitable, while the hardware business suffered a loss of 27-million pula, although sales improved by 40% in the second half of 2024.
Despite the challenges posed by Zimbabwe and Zambia’s currency struggles, Choppies remains optimistic about its future performance, with plans to continue managing inventory levels carefully and strategically position itself for the coming year.
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