Shifting consumer sentiment impacts Choppies

Supermarket group Choppies says Zimbabwean consumers are increasingly looking for more affordable and convenient shopping options, which in turn is impacting the retailer’s margins.

The Botswana Stock Exchange (BSE)-listed supermarket group has 33 stores in Zimbabwe in addition to its presence in other countries such as Zambia and Namibia.

In its financials to June 30, 2023, Choppies said the Zimbabwe segment EBITDA was down 108.1 percent to BWP3 million, largely due to weak consumer spending.

“Consumers have significantly shifted to shopping at smaller stores and from formal retailers because smaller outlets are able to operate with lower overhead costs, which allows them to offer lower prices to consumers and better exchange rates that are not necessarily compliant with exchange laws,” the company said.

Choppies noted Zimbabwe’s economy is now largely dollarized, and this leads to high demand for the United States dollar as most people are paid in Zimbabwean dollars.

“We are closely monitoring the exchange rate as it will impact both Zimbabwe’s and the group’s profitability and net asset value.”

The company added that, as a result of the various factors, Pula sales declined by 48,3 percent while EBIT and EBITDA declined by 151,6 percent and 125,5 percent, respectively, as cost inflation reduced margins.

The group’s retail sales for the period under review increased by 6,5 percent to BWP 6,433 million, driven by sixteen new stores coupled with price growth of 6.8 percent.

Sales volumes increased by 1,6 percent, and excluding the new stores, they declined by 4.6% on a comparable basis.

In Pula terms, gross profit grew by 4,0 percent to BWP 1,359 million despite the challenging economic environment.

“Botswana and Namibia marginally grew gross profit rates while rates in Zambia and Zimbabwe declined,” the company said.

The group said while expenses increased 5,1 percent, excluding the depreciation restatement, expenses grew 9.8 percent, partly due to new stores and inflation.

It said foreign exchange losses on lease liabilities of BWP31 million against a gain of BWP28 million last year were partly offset by foreign exchange gains on Zimbabwean legacy debt receipts of BWP18 million.

Choppies said last year that while it has divested from loss-making regions, it has committed to managed expansion in Zimbabwe and two other countries.

In Zimbabwe, the group has a total of 33 supermarkets, of which four are value stores and 29 are super.-businessweekly