South African retail giant Shoprite is finally set to exit the Kenyan market by the end of this month with the closure of its Nairobi head office.
Shoprite entered Kenya two years ago, hoping to capitalise on the collapse of erstwhile retail giants Nakumatt and Uchumi, but failed to break even in a market that has earned the country the infamous tag of being a retail graveyard.
The final straw for Shoprite came in the form of record losses in excess of Sh3.2 billion in the 2019/20 financial year.
The retailer has notified Kenya Union of Commercial Food and Allied Workers that it will shut its head office this month and that it has sent redundancy letters to employees.
“In line with the company’s decision to exit the Kenyan market, it intends to permanently close its home office. It is contemplated that the proposed closure will cause employees of the said office to be declared redundant and therefore the termination of their employment contracts on the account of the redundancy. This decision will impact you,” reads part of the letter.
“This letter, therefore, serves to provide you with not less than a month notice prior to the date of the intended termination on account of redundancy in terms of Section 40 of the Employment Act of 2012.”
The letter further explained that the firm’s Kenyan operations were no longer viable, citing the losses for the last financial year.
Shoprite said the redundancy will affect seven employees, marking the end of the brand in the country.
The retailer has closed all its four branches - Westgate Mall, Garden City, Karen Waterfront and City Mall in Nyali, Mombasa.
The closure of Shoprite branches in 2020 rendered hundreds of employees jobless, with the closure of the Nyali branch in Mombasa and Waterfront branch in Nairobi’s Karen area coming within four months of each other earlier in the year.
The South African-owned retailer follows in the footsteps of other foreign retailers that have found it hard to crack the Kenyan market, including Botswana-based Choppies, which had entered the market by acquiring a majority stake in struggling local retailer Ukwala in 2016.
Local retailers have also found the going tough in recent years, a situation that has been exacerbated by the Covid-19 pandemic.
Shoprite has been reviewing its long-term options in Africa as currency devaluations, supply issues, and low consumer spending in Angola, Nigeria, and Zambia continued to weigh on earnings
Kenya has not been easy, either.
“Kenya has continued to underperform relative to our return requirements,” the retailer said, adding its decision to leave had been compounded by the economic impact of the pandemic.
The retailer, which has over 500 stores and over 20 million shoppers across the continent, reported a 6.4 per cent rise in sales for the year ended June 28, 2020, with like-for-like sales up by 4.4 per cent as customers spent more on groceries at its discount Usave and mid-to-upper end Checkers stores.
At the end of 2019, Botswana budget retailer Choppies announced its intentions to exit the Mozambique, Tanzania and Kenya markets.
The company added that it posted a Sh4.8 billion after-tax loss for the financial year ending June 2018.
The coronavirus pandemic, among other factors, have worsened retailers’ woes and heavily reduced footfall.
Another South African fashion retailer TF, which has four outlets, is set to exit Kenya over the same reason.
Naivas has emerged as Kenya’s leading supermarket king in terms of floor space after it acquired the assets of six Nakumatt branches at Sh422.5 million.
