Retail stores are riding on strong demography credentials in Africa’s biggest economy to make big sales, despite economic slump that hit the economy last year.
Shoprite Holdings Limited reported full-year earnings in line with analysts’ estimates as Africa’s largest food retailer grew sales in Nigeria by 48.2 percent in the year to July 2, 2017.
Headline earnings per share, which exclude one-time items, rose 12 percent to 10.07 rand, the Cape Town-based company said in a statement on Tuesday.
“Restrictions on key imported lines remained a challenge in Nigeria, but through a focused marketing drive on local products we managed to generate a 48.2 percent sales growth (52 weeks: 50.2%) in local currency,” the retailer said.
“Notwithstanding the trading difficulties, the customer base remains healthy, with the Group’s supermarkets in Nigeria increasing customers by 38.2 percent.”
Shoprite said Nigeria holds significant growth potential for the Group despite short-term issues including the oil price, a devaluing currency and the ban on certain imports to stem the outflow of dollars.
Shoprite has 23 stores in Nigeria with a further two under construction.
The shares rose 2.5 percent to 206.08 rand as of 9:23 a.m. in Johannesburg, extending the year’s gain to 20 percent and valuing the company at 123 billion rand ($9.4 billion).
“We believe there is room for further growth as we continue to improve efficiency and profitability both in South Africa and beyond the country’s borders,” chief executive officer Pieter Engelbrecht said.
The board declared a full-year dividend of 5.04 rand a share, an increase of 12 percent.
In the last two years, Retail Supermarkets Nigeria Limited has opened 10 stores , while Artee Industries Ltd opened six new Spar stores. Local players such as the convenience store chains, Addide Supermarket and Best Choice, continue to perform strongly in the Nigerian market, says Euromonitor International.
With a growing urban population seeking greater convenience and comfort while shopping, and with many state governments keen to modernise trading standards, modern grocery retailers and non-grocery retailing in addition to internet retailing have posted strong growth rates, adds Euromonitor.
“We have been holding on in spite of recession. We have managed to hold on to our ground by doing aggressive promo that is helping people come back to SPAR. We also have plans to do more innovative promos,” SPAR Nigeria marketing manager John Goldsmith told BusinessDay on the phone.
A source at Grocery Bazzar (GB) said sales of the retailer was ‘not that bad’.
Nigeria’s 182 million population which is growing at 2.6 percent rate per annum provides a boost to retail stores. Urbanisation has forced many to major cities, raising patronage for products sold at such stores, while the convenience for buying household needs at a one-stop shop is fuelling demand for retail stores.
In 2012, the United Nations Organisation (UN) put Nigeria’s urbanisation rate at 51 percent, suggesting that over 80 million people lived in the cities. The UN says this number is growing at an annual rate of 3.5 percent.
Nigerian mono-product economy was hard hit by oil price lows which has cut government revenue by 50 percent and reduced household incomes and expenditure significantly.
The retail sector is driven by Nigeria’s middle-class estimated at 25 to 30 percent . Most of the goods bought from retail stores are foods and on-the-counter products, according to a multinational company supplying food products to one of the online stores.
The success of retail stores mirrors the boom of online shops dominated by Jumia, Konga, Payporte, Kara and DealDay.
“Nigerians are getting more comfortable shopping at retail shops. We did our best last year, but it wasn’t as expected. However, there is much competition now than, say, in 2015,” a manager at a retail store in Lagos said on the condition of anonymity.
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