South Africa top retail merchant, Shoprite Holdings, has disclosed plans to sell or close its remaining two stores in Kenya by the end of the year.
This is coming two years after entering into the retail scene of the East African country.
The company announced this on Tuesday, citing that the Kenyan business has continued to underperform relative to the return requirements.
“Kenya has continued to underperform relative to our return requirements,” the company said as it posted a 16.6 per cent rise in annual group earnings, adding that its decision to leave had been cemented by the economic impact of the COVID-19 pandemic.
The decision to leave Kenya comes a month after widespread reports that Shoprite was considering selling its stake in its Nigerian subsidiary.
The company invested in Kenya after the Kenyan retail companies Uchumi Supermarkets and Nakumatt collapsed.
The supermarket group has been reviewing its long-term options in Africa as currency devaluations, supply problems and weak consumer spending in Angola, Nigeria and Zambia have weighed on earnings.
Shoprite shares jumped more than 11 per cent to a five-month high as investors cheered the group earnings, post-lockdown outlook and dividend.
According to Mr Pieter Engelbrecht, the company’s Chief Executive Officer, the firm has renegotiated 48 rental agreements as part of review which are being done by either reducing rent payments or converting them to local currency.
The firm has also restricted capital allocations to its supermarkets outside South Africa.
Shoprite, with more than 2,300 stores across Africa, reported record sales of 156.9 billion rands, up 6.4 per cent for the year ended June 28, with like-for-like sales up 4.4 per cent as customers spent more at its discount Usave and mid-to-upper market Checkers stores.
Sales at its loss-making rest of Africa operations declined 1.4 per cent as the lockdown policy impacted the result.
It stated, “complexity in managing COVID-19 regulations across multiple territories negatively impacted the second half.”
Diluted headline earnings per share (HEPS) from continuing operations climbed to 765.8 cents against a restated 746.9 cents a year earlier, while adjusted diluted HEPS rose 16.6 per cent.
Shoprite declared a final dividend of 227 cents per share and said it had traded ahead of expectations since the beginning of July.