Botswanan supermarket chain Choppies has engaged Redford Capital to sell its South African assets, which includes its store network in South Africa. It is another sign that the pioneering chain, which has still not released its annual results to June 2018, has significant and as yet undisclosed financial problems.
Redford Capital, which describes itself as a niche provider of services to “growth and distressed” businesses, is seeking expressions of interests for Choppies’ South African assets. Expressions of interest close on the 23rd September 2019. The deadline for submission of binding offers is one week later.
Choppies has 94 stores in South Africa, its largest market. In South Africa, Choppies acquired 21 Jwayelani stores in Kwazulu-Natal and the Eastern Cape in 2016 (which still retain the Jwayelani name).
In its 2017 annual report, Choppies announced total revenue of nearly P8,852m ($856m) up from P7,369m the year prior and double its revenues in 2014. In March 2018, Choppies forecast up to a 30% increase in profit for the six month period ending December 2017, driven mainly by an increase in profit in its South African operations. It was the first time Choppies had made a profit in South Africa since opening its first store there in 2008. However, Choppies’ share price fell as much as 85% in September 2018 after the company said it would miss a deadline to publish its financial results for the year to June.
Choppies, which has dramatically expanded in the past decade, is overstretched. It has chosen to expand in the new and often challenging markets of Zambia, Namibia, Zimbabwe, Mozambique, Tanzania and Kenya all at once. Choppies bought out Ukwala in Kenya and was trying to become a major grocery player in the country. It is now shutting stores and struggling to pay suppliers.
Until April 2018, operations in South Africa were not profitable. This suggested that the entire profitability of the business rested on the performance of the Botswanan operations.
In May 2018, Choppies reported 22% growth of both sales and net profit for its half year results ended December 2017. That trading statement had been delayed from March 31st. From May 4th 2018, Choppies shares started falling precipitously, although even then the share price was half its 2015 peak.
In May 2019, the Choppies board suspended its longtime CEO Ramachandran Ottapathu. The move follows the replacement of its CFO in December 2018. Ottapathu retains an office (albeit away from Choppies HQ) and an active interest in Choppies (and a shareholding), and is apparently still in close contact with some of the executive team at the Choppies office in Gaborone. With the financial crisis ongoing his chances of returning look to be diminishing.The tale of overexpansion and financial problems is a familiar one to Africa retail watchers, familiar with trials of Kenyan supermarket chains Nakumatt and Uchumi.
