Choppies aims to grow its stores
CHOPPIES Enterprises hurt by a commodity-price slump that’s led to customers in mining towns being fired, plans to expand its number of stores in southern Africa by almost 25 percent over the next two years as it seeks to lure business in different locations.
Botswana’s biggest supermarket chain is planning to increase outlets to 250 from 203 at the end of last year, according to chief executive Ram Ottapathu.
“We are trying to move away from that reliance” on mining towns, Ottapathu said in an interview this week at the company’s head office in Gaborone.
“As the footprint grows, it will not be an issue.”
The price of platinum, which is mainly mined in South Africa, slumped 28 percent in 2015, before only a slight gain, hurting Choppies’ business in towns such as Rustenburg.
That has been compounded by soaring food prices, following the worst drought since at least 1904.
In Botswana, state-owned mining company BCL closed its unprofitable copper and nickel operation in Selebi Phikwe last year, reducing the settlement of 50 000 to a virtual ghost town. Choppies has two stores in the area.
The grocer plans to open 26 supermarkets this year at a cost of about R300 million, Ottapathu said.
This will include growth in KwaZulu-Natal, which is not mining focused.
Ten of the new stores will be in Zambia and one or two stores are planned for Zimbabwe.
Funding will come from its own cash reserves and a potential extension of the date of maturity on its short-term debt.
With almost 500 million pula (R629.45m) in existing borrowings, any additional debt taken will be negligible, the chief executive said.
In 2018, Choppies will aim to reach the 250-supermarket target before pausing the growth initiative, he said.
Choppies shares have dropped 53 percent in Johannesburg since the beginning of last year, the second worst performer on the 162-member FTSE/JSE Africa All Shares Index.
Net income in the year to June 30 declined 52 percent to 88.5 million pula.
With outlets also in Zimbabwe, Zambia, Tanzania, Kenya and Mozambique, it has no plans to enter more countries this year, Ottapathu said. – Bloomberg