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Shoprite seizes opportunity in Kenya to ramp up Africa expansion

Africa’s biggest supermarket chain, Shoprite Holdings, will take advantage of disarray in Kenya’s grocery sector to open its first stores in the major East African market by the end of this year.

Two of Kenya’s three top retailers – Uchumi Supermarkets and former regional giant, Nakumatt – are failing, opening the door to chains such as Shoprite and Carrefour.

Chief executive Pieter Engelbrecht said Shoprite had never considered Kenya before because of the dominance of those three players. Six of its seven new stores will be in Nairobi.

“Retail in Kenya currently is in total disarray… we could now go in and secure seven premises without paying anything other than agreed rental,” he told Reuters over the phone after the presentation of Shoprite’s half-year results on Tuesday.

The group reported a 14.2 per cent increase in headline earnings per share and an interim dividend increase of 13.9 per cent after Monday’s market close.

Shares in Shoprite hit an all-time high of 274.45 rand ($23) and was up 2.24 per cent to 263.24 rand ($22) by 1318 GMT.

“Excellent numbers really. Also in the background is the possibility that the Reserve Bank will begin a series of rate cuts, so people will have more disposable income and Shoprite is rightly positioned to benefit from that,” Cratos Capital equities trader Greg Davies said.

Growth

Shoprite, which is 17-percent owned by retail tycoon Christo Wiese, has grown from eight supermarkets in 1979 to a no-frills mass-market grocer with operations in 15 African countries including two stores in Uganda.

South African retailers have struggled to lift earnings at home as high unemployment and household debt has squeezed consumer income.

It has fared better than most with its focus on budget-conscious consumers, including more than 10 million South Africans on welfare grants.

Recently announced increases in those grants will help boost sales at Shoprite, Engelbrecht said.

The company has also set its sights outside Africa, he said, and is exploring an opportunity in Eastern Europe.

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