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Shoprite Explores Sale of Nigeria Unit

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South Africa’s Shoprite Holdings says that it is exploring a sale of its Nigeria unit as it reevaluates its business model. The retail group issued the statement on Monday in an operational and voluntary trading update to its investors for the year ended June 28, 2020. Shoprite first announced in 2019 that it was revaluating its international strategy and that it had commissioned an external review of the Nigerian operations.

While Shoprite announced a 6.4 per cent increase (R156.9billion) in total sales of merchandise for the period under consideration, despite several challenges posed by the COVID-19 pandemic, the group said its plans to discontinue its Nigeria operations came after 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. Any further updates will be provided to the market at the appropriate time,” the company said.

Shoprite has struggled in markets outside South Africa and its operations outside its home country contributed less than 12 per cent of its total sales, a 1.4 per cent fall from last year. The company partly blamed the COVID-19 pandemic for slowing demand in its operations outside South Africa.

“Second half constant currency sales growth of 6.3% was significantly impacted by lockdown regulations across the 14 African countries in which we trade. Lockdown restrictions pertaining to store closures; social distancing; transport restrictions; the movement of people; trading hours; workforce limitations and trade in alcohol impacted various regions to differing degrees at different times.”

Shoprite opened its first store in Nigeria in December 2005 as an anchor tenant at the Palms Mall located at the upscale Victoria Island suburb of Lagos, Nigeria’s bustling commercial capital. Shoprite now has a total of twenty-six stores across eight states in the country including the Federal Capital Territory, Abuja.

Industry sources told Lagos Times that Shoprite’s exit might be due to the economic slowdown in Nigeria, which has been exacerbated by foreign exchange instability and intractable logistics issues. West Africa’s largest crude oil exporter, is effectively in a recession and the naira, Nigeria’s beleaguered local currency has lost more than twenty-five per cent of its value in the past year.

High inflation rates have greatly reduced the disposable incomes of most middle-class Nigerians who typically patronise stores such as Shoprite while stratospheric unemployment figures and rising taxes, levies amid a rapidly deteriorating security situation may have also hurt the company’s bottom line.

Shoprite joins a list of South African retailers that have recently exited the Nigerian market. Mr Price, another well-known retailer ended its Nigerian operations in June while Woolworths and Truworths have closed their local units in recent years.

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