- Group added 14 new stores and acquired of 108 liquor and hardware outlets
- Choppies saw a 28.4% increase in gross profit to P1.75n compared to P1.36bn in prior year
GAZETTE REPORTER
Choppies Group has reported a significant 31.8 percent increase to P8.48 billion in retail sales for the year ending 30 June 2024.
The total sales of the Group – which is a leading retail giant in Southern Africa – soared from P6.43 billion in the previous year.
According to CEO Ramachandran Ottapathu in the company’s Abridged Audited Group Financial Results, the rise was largely driven by the addition of 14 new stores, acquisition of 108 liquor and hardware outlets from Kamoso Group, and an uptick in inflation and volume growth.
“The expansion of our store network and the acquisition of key assets from Kamoso were major contributors to our growth this year,” he wrote. “Despite a challenging economic environment, we’ve been able to maintain our momentum.”
Weaker exchange rates
Choppies’ retail segments saw a combined volume growth of 17 percent, though the performance was uneven across different markets. Zimbabwe, for instance, experienced negative volume growth while other regions posted gains.
The segments also achieved modest price growth of 0.2 percent, though this was tempered by weaker exchange rates. Sales volume for like-for-like stores grew by an impressive 21 percent.
However, the retailer’s gross profit margin dipped slightly, dropping by 50 basis points to 20.6 percent, down from 21.1 percent the previous year.
This decline was attributed to a combination of competitive discounting and the dilutionary effect of the Kamoso acquisition, which has lower margins compared to Choppies’ core business.
Kamoso acquisition
“Margins have been under pressure, particularly in Botswana, Zambia, and Zimbabwe, where we faced intense competition,” Ottapathu said.
“The Kamoso acquisition, while essential for our growth strategy, also brought in lower-margin businesses, which impacted our overall gross profit rate.”
Despite these challenges, Choppies still saw a 28.4 percent increase in gross profit, which reached P1.75 billion, compared to P1.36 billion in the prior year. Choppies Namibia, in particular, was a bright spot with an improved gross profit rate.
Expenses for the year increased by 30.8 percent primarily due to inflation, costs associated with new store openings, and the Kamoso acquisition.
Forex losses
However, Ottapathu pointed out that excluding specific items – such as foreign exchange losses on lease liabilities and gains on Zimbabwean legacy debt – expenses rose by 37.3 percent.
“We had significant one-off expenses this year, including a foreign exchange loss of P17 million, a foreign exchange gain on Zimbabwean legacy debt receipts of P55 million, and a profit on the sale of our Mediland business,” he said. “We also had to account for a P15 million impairment of goodwill in Zimbabwe.”
Choppies’ operating profit (EBIT) increased by 17.2 percent to P321 million, up from P274 million in 2023. When adjusted to exclude foreign exchange and other one-off items, EBIT rose by 26 percent, underscoring the company’s underlying profitability.
Net finance costs
Net finance costs for the group were higher than last year, partly due to the inclusion of costs related to the Kamoso acquisition.
However, Choppies segments managed to reduce net finance costs by P11 million, thanks to lower borrowings, although interest expenses on leases rose due to the new stores.
The company’s effective tax rate also jumped to 20.8 percent, up from 9.1 percent in 2023. This increase was largely due to the impairment of Choppies Zimbabwe’s deferred tax asset of B9 million, compared to the previous year when the company raised a P9 million deferred tax asset.
More profitable
“With Botswana becoming more profitable, our tax liabilities have naturally increased,” Ottapathu said, noting that the company remains focused on navigating the economic challenges in the region while capitalising on growth opportunities.
Despite the hurdles, Choppies’ strategy of expanding its footprint and acquiring key assets appears to be paying off, positioning the company for continued growth in a highly competitive retail environment.