Choppies worried about deflationary pressures

Choppies now has 18 stores in deflation hit Zimbabwe
Choppies now has 18 stores in deflation hit Zimbabwe

A strong growth in sales for the half-year to December 2014 for retail giant, Choppies, was partially offset by deflationary pressures.

The deflationary pressures were due to the weakness of the South African Rand as well as falling commodity prices.

In the period, the Botswana Stock Exchange (BSE) listed company recorded a 20 percent jump in revenue to P3 billion
 while gross profit rose 21 percent to P 644 million.

“The positive topline performance from increased sales volumes was partially offset by continued deflationary pressures due to Rand weakness and falling commodity prices. Gross profit margins improved during the period,” reads a statement accompanying the financials.

The retailer’s portfolio now stands at 121 stores in three countries including 72 outlets in Botswana, 18 in Zimbabwe and 31 in South Africa.

Botswana inflation is now at a four decade low of 2.8 percent as at February as prices rise at a much slower pace mainly due to falling oil prices.

SA inflation, on the other hand, is it sitting at a four year low of 3.9 percent while Zimbabwe is officially in a deflation period with February inflation rate at a negative 1.40 percent.

In the period, the retailer’s total number of stores rose to 121 while total retail space was up by 18 percent to 177,031 square metres.

In Botswana, Choppies says the group will continue to expand, though at a slower rate.

“As part of our expansion plans, we expect to open more stores in Botswana, South Africa and Zimbabwe, although the rate of expansion in Botswana is expected to slow. In accordance with our long term strategy, we are also well advanced in our plans to open stores in a number of new markets this year,” added the statement.

The group also says it continues to evaluate a possible secondary listing on the Johannesburg Stock Exchange in 2015 in order to access new investors and to promote increased liquidity in their shares. In Zimbabwe, the company says it registered strong revenue growth as it expanded its footprint in that country.

High marketing and promotional expenditure, however, negatively impacted margins, while the continued strengthening of the US Dollar had a deflationary impact, a trend expected to continue for the rest of the financial year.

Performance of the South African operations continued to improve during the period with the business expected to become profitable in the near future as business reach critical mass. “Trading conditions post the 2014 platinum belt strike remained challenging. This situation may continue for the foreseeable future,” stated Choppies.

Editor's Comment
Escalating fuel prices cause panic

Nowadays it is not uncommon to purchase an item for a certain commodity and return to the shops in a week, to find the same item has gone up by a significant amount of money.Botswana Energy Regulatory Authority (BERA) last week announced yet another fuel price increase, which follows yet another increase that came into effect on March 29. Hardly two months later on May 12 boom, BERA announced yet another increase, which came into effect at a...

Have a Story? Send Us a tip
arrow up