We are encouraged by the SHP decision to review alternative operating models as we think its African strategy was unfocused, resulting in a complex portfolio of scattered stores, with management having to contend with the peculiarities of each country. We argue that SHP’s accelerated expansion into Africa since 2011 has been a costly exercise, and the returns generated from the Non-SA supermarkets have diluted the group’s ROA’s and lowered the profitability of the Non-SA supermarkets division. SHP should narrow its focus on a smaller number of key countries and capital should be redeployed to fund an accelerated expansion of Checkers, as the company sets its sight on increasing its share of the higher-income consumer segment in SA. We think it may be opportune to reconsider the fit of SHP’s Furniture business in this supermarket group.
