South African retailer Shoprite has announced plans to cease operations in Kenya by December once it closes down two functioning branches in West Gate Mall and Garden City.
The retailer, which has been operating locally since December 2018, has attributed the move, which will lead to numerous job cuts, to reduced customer traffic in its supermarkets.
“Most likely we will be out of the Kenyan market by the end of the calendar year, meaning December, either by closing or disposing,” said Shoprite CEO Pieter Engelbrecht in a statement.
Increased competition in Kenya’s retail industry from cash rich sellers such as Naivas, Carrefour and Quickmart has also affected Shoprite’s customer base.
The closure announcement comes as no surprise with the firm alluding in its recently released financials that Kenya’s business was on a downward trajectory. Shoprite has so far closed its Karen branch in Nairobi and Nyali division in Mombasa.
“Kenya, with three stores at year-end, has continued to underperform relative to our return requirements. Post year-end, one store has been closed given the ensuing economic impact of Covid-19,” the retailer added in a notice to shareholders while releasing financial results for the year to June.
In the year ended June 2020, Shoprite’s net loss for businesses outside South Africa stood at R.28.2 million (Ksh. 1.8 billion). The firm’s poor performance in Kenya has been blamed for the surge in overall losses.
“Supermarkets Non-RSA’s R28.2 million trading loss showed a marginal improvement on last year. However, this was notably impacted by the loss in our Kenyan business, the negative impact of restrictions and store closures due to Covid-19 and a R106.2 million reduction in interest income earned on government bonds and bills,” said Shoprite in its financials.
When initially setting up in the country, Shoprite said it was capitalizing on a gap left by local retailers such as Nakumatt and Uchumi which were experiencing cash flow problems at the time. Nakumatt and Uchumi have since gone under.
“Retail in Kenya currently is in total disarray… we could now go in and secure seven premises without paying anything other than agreed rental,” Shoprite said ahead of the Kenya entry.
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