Shoprite Records Slowest Sales Growth
3 min read
Shoprite Nigeria recorded its slowest sales growth in years as the popular retailer struggled to grow sales in an economy battling declining consumer spending. For the first time, Shoprite Nigeria recorded a single digit increase in sales as turnover grew by only four per cent in 2018 compared to 50.4 per cent recorded in 2017. The sharp slowdown in the country’s largest retail shopping chain has been linked to low consumer confidence in the country despite the declining rate of inflation. Low consumer demand has resulted in the build-up of inventory in many firms.
Analysts note that though the economy has recovered from the 2016 contraction, growth remains fragile in the economy only managing a marginal 1.95 per cent growth in the first quarter of 2018. Growth in the second quarter is expected to remain flat according to Yemi Kale, Statistician General of the Federation, an indication of the low level of economic activity still plaguing the country.
Consumer spending fell by -0.99 per cent in 2017 according to figures obtained from National Bureau of Statistics (NBS) as Nigerian consumers struggled to keep up with rising expenses amid an unfriendly economic environment with double-digit inflation and unemployment.
Shoprite, Africa’s largest retailer, blamed the slow pace of economic growth in the country for the lacklustre sales growth performance. Nigeria’s economy expanded by only 0.8 per cent in 2017 and 1.9 per cent in the first quarter of 2018, meanwhile inflation has remained at double digits since 2016 which has eroded the purchasing power of consumers, thus, hurting national consumer confidence.
The Central Bank of Nigeria Consumer Survey Report for second quarter 2018 showed that consumers’ overall confidence outlook worsened in Q2 2018, as more consumers were less optimistic in their outlook. The index fell to -6.3 points which was 10.7 points lower than the index in the second quarter 2017. The report stated that consumers attributed the moderation in their outlook to worsening economic conditions.
Majority of consumers nationwide expect inflation and exchange rate to rise and don’t think that the next 12 months would be an ideal time to purchase big-ticket items like motor vehicle and houses.
The Consumer Expectations Survey (CES) for Q2 2018 was conducted during the period May 28 to June 15 2018, covering a sample size of 2,070 households drawn from 207 Enumeration Areas (EAs) across the country.
In line with the findings by CBN, KASI Insight Consumer Confidence for Nigeria dropped to 20 points last month from 27 points the previous year. In January, consumer confidence was 25 points, showing a continuous fall in consumer confidence in the country.
The KASI Insight Consumer Confidence Score (KIC Score) is a composite index of 7 questions that runs monthly via consumer polls in countries surveyed. The data output is based on a fresh, randomly selected representative of city dwellers aged 18–64.
Since 2015, Shoprite has struggled with foreign exchange restrictions, rising food inflation and slow economic growth in the country. Amid such a tight economic environment, the company stalled in developing new shopping centres in the country. Import restrictions in 2016 forced the company to look inward to source for locally made products to retail. As a result, up to 80 per cent of sales in Shoprite Nigeria are locally made products.
Shoprite projects that food inflation will likely increase in the coming year but appear to be more confident in the economy going forward as the company stated that “the Nigerian economy is now beginning to show signs of life”.
The company projects that any increase in the minimum wage in Nigeria will help boost sales and profit growth next year. Shoprite announced that it plans to open 88 new supermarkets in 18 non-RSA countries. It did state how many of those shops will be opened in Nigeria.
The company recorded its first annual earnings decline in 19 years which it blamed on currency devaluation in Angola and poor showing in South Africa and Nigeria. Local currency sales declined by 9.3 per cent in Angola, the second largest oil producer after Nigeria in Africa. But Shoprite recorded local currency sales growth of 8.8 per cent in Zambia.
Chief Executive of Shoprite, Pieter Engelbrecht told analysts at the company’s results presentation that this year was probably its toughest.
Analysts note that the fact that Shoprite which targets lower to middle-income consumers in Nigeria is struggling with sales is an indication that the average Nigerian consumer purchasing power has been badly hit by the triple whammy of rising inflation, unemployment and a weaker currency.
