South Africa and Botswana-listed retailer Choppies has announced that it will spend $3 million in its regional expansion plan that will see it add two stores in Kenya and one in Tanzania this year.
In its second-half results for 2017, Choppies said the new Kenyan stores will cost $2.37 million, while the Tanzanian one, billed to be the biggest in the country, will cost $700,000.
The $2.37 million is way below the $22 million it had previously stated it planned to use to increase its presence in Kenya, with 22 new stores.
“The planned revamp of stores taken over from Ukwala has started, and we expect to finish renovations by end of July. The market is ripe for a turnaround, and we are hopeful that this will pay off,” it said.
It currently has 12 stores in Kenya and two in Tanzania.
Early this year, Choppies said it was in talks with owners of Nanyuki Mall in central Kenya to take over as the anchor tenant after the struggling Nakumatt Holdings was evicted for non-payment of rent.
“We are currently negotiating with the owners of the mall, but nothing is signed yet. We hope to have a positive conclusion to the talks by the end of January,” Parin Patel, a Choppies director said at the time. “After that, we would need around two to three months to settle in and open our doors.”
It opened a new store in at South Field Mall in Embakasi, Nairobi and plans to open another in Kiambu Mall, in the outskirts of the capital city, taking up space previously allocated for Nakumatt.
The South Africa and Botswana-listed retailer in March last year said it would spend $2.5 million in refurbishing the eight branches of Ukwala Supermarkets, which it took over in December 2016.
It invested $10 million in the acquisition that saw it get a controlling stake, with the remaining 25 per cent equity being held by Export Trading Group, a Tanzanian firm.
In November last year, the Botswana supermarket chain Choppies Enterprises announced plans to enter the Kenyan market with 22 new branches in a $20 million expansion drive but with the latest financial filing, this seems to have been scaled down.
“We will have these new stores spread out across all major towns as we seek to fill in the gap left by the struggling retailers. We are confident that our business will thrive,” Choppies East Africa executive director Vijay Kumar said.
The Tanzanian store is expected to open at the end of this month.
“This will record good volumes, as it will be the biggest Choppies retail outlet in Tanzania. Retail site development is generally slow in Tanzania, and we expect to grow at a slow pace in this market,” a Choppies statement said.
In November 2017, chief executive Ramachandran Ottapathu said Choppies was still operating below break-even in Tanzania and Kenya, and its half-year results does not show the performance of the two markets.
It, however, says that Kenya contributed 3.4 per cent of its revenues while Tanzania brought in 0.1 per cent.
In its six months to December 2017, Choppies, which makes around 40 per cent of its sales in Botswana, saw its revenues rise to $54.8 million, from $46.72 million. The retailer reported a net profit of $6.73 million in the six months to December, up from the previous year’s $5.54 million.
In terms of revenue growth, Kenya’s existing stores recorded a 28 per cent growth, while its new stores saw a 40 per cent growth, to bring in a cumulative store growth of 68 per cent.
In Tanzania, its existing stores saw a 95 per cent growth, while the one new store recorded a 132 per cent growth, to have a cumulative 227 per cent store growth.