SOUTH African retail giant Shoprite Holdings has announced plans to auction off its network on Nigerian outlets and pull out of the country in response to a dramatic clump in sales as a result of the coronavirus pandemic.
Health-wise, Nigeria has been spared the worst of the global pandemic but economically, the country has been hit extremely hard. For starters, Nigeria’s main revenue earner crude oil has suffered from a collapse in both prices and demand, forcing the government to resort to borrowing to fund its 2020 budget.
Due to the lockdown, travel restrictions and reduced industrial output, retail sales have also been hit hard, which has depressed the profits of outfits like Shoprite. With sales at an all time low, Shoprite said it is considering an outright sale of its operations or selling a majority stake in its Nigerian subsidiary.
International supermarkets excluding Nigeria contributed 11.6% to Shoprites’ group sales but from 2018 there was a 1.4% decline in sales. South African operations contributed 78% of overall sales and saw 8.7% rise for the year.
With the Covid-19 lockdown, sales have been further depressed as customer visits declined by 7.4%, although the average basket spend increased by 18.4%. Sales in its core South African business rose by 9.4% in the last three months of the fiscal year through June, although it spent 19m on Covid-19 related costs.
According to the company, it has already been approached by potential investors willing to take over its Nigerian operations. In April Shoprite announced it lost 8.1% of its sales in constant currency terms at the end of the second half of 2019 due to the September xenophobic attacks.
In September, Shoprite stores in Nigeria were vandalised and looted following an alleged xenophobic attack in South Africa, targeting Nigerians. Owing to fears of further attacks several Shoprite stores across Lagos were sealed and guarded by police, which hurt profits immensely before Covid-19 came along and caused further damage.
A Shoprite spokesman said: “Following approaches from various potential investors and in line with our re-evaluation of the group’s operating model in Nigeria, the board has decided to initiate a formal process to consider the potential sale of all, or a majority stake, in Retail Supermarkets Nigeria Limited, a subsidiary of Shoprite International Limited. As such, Retail Supermarkets Nigeria Limited may be classified as a discontinued operation when Shoprite reports its results for the year.”
Shoprite is not the only South African country leaving Nigeria as in June, the Mr Price Group also stated plans to close its Nigerian business to focus on its South African home market. Mr Price, a popular affordable clothing, sport, and home wear brand has closed four out of its five Nigerian stores and expects to close the last one in the coming months.
Nigeria is the third country where Mr Price has exited, as it had left Australia and Poland in 2019. The Durban-based company cited challenges like supply-chain disruptions and challenges in getting funds out of the country as reasons it has struggled to operate in Nigeria.