Retailer Choppies is in talks to sell its Zimbabwe unit as it has decided to exit the country, it said on Friday.
The company has entered into discussions regarding a possible sale of the business operations of Nanavac, trading as Choppies Zimbabwe, for cash.
If the sale is successful it could have an effect on Choppies’ share price, the company, which has a primary listing in Botswana and a secondary listing on the JSE, said in a statement.
Choppies Zimbabwe has 30 stores in the Southern African country.
The potential sale, which would be subject to certain conditions and regulatory approval, is aligned to Choppies’ strategic intent to focus on profitable retail.
In Zimbabwe, over the last two years, there has been a significant shift to the informal retail sector, leaving the formal retail sector to battle a reduction of up to 30% in footfall and having to compete with the informal sector, it said.
“While we believe in the country’s long-term viability, Choppies as a group needs more capital to support its Zimbabwean operations for extended periods and has already invested significant capital to support the operations,” it said.
There is no certainty at this stage that the discussions will lead to a formal transaction, and approval from the Zimbabwean Competition and Tariff Commission is required. Shareholders were advised to exercise caution when trading in their Choppies shares until a further announcement is made.
Business Day reports in September that Choppies 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.
Choppies 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%.
At the time of the release of the results, the group said Zimbabwe continued to pose challenges and despite the introduction of the Zimbabwe gold currency in April, the country’s economic troubles persist.
This shift to the informal retail sector as well as the weakening exchange rate, resulted in an increase in operating losses in Zimbabwe.
With Nompilo Goba
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