Shoprite records rise in profit as South Africa stores prove resilient
August 22, 20171.6K views0 comments
Shoprite Holdings Ltd. reported full-year earnings in line with analyst estimates as Africa’s largest food retailer boosted market share in South Africa ahead of a partial tie-up with clothing and furniture specialist Steinhoff International Holdings NV.
According to Bloomberg’s report, headline earnings per share, which exclude one-time items, rose 12 percent to 10.07 rand in the 12 months through June, the Cape Town-based company said in a statement on Tuesday. The board declared a full-year dividend of 5.04 rand a share, an increase of 12 percent. Shoprite expects “positive sales momentum to continue,” the retailer said, after revenue advanced 8.4 percent.
The shares rose 2.5 percent to 206.08 rand as of 9:23 a.m. in Johannesburg, extending the year’s gain to 20 percent and valuing the company at 123 billion rand ($9.4 billion).
“We believe there is room for further growth as we continue to improve efficiencies and profitability both in South Africa and beyond the country’s borders,” Chief Executive Officer Pieter Engelbrecht said. While the South African economy is in a recession, “the group remained resilient with growth in sales and market share.”
Read Also:
The earnings are the first to be reported by Shoprite since fellow retailer Steinhoff agreed to buy a 22.7 percent stake as part of the planned listing of its African assets including clothing chain Pep. This will be the first step taken by South African billionaire Christo Wiese, who chairs and is the largest shareholder in both companies, in combining his interests in the retail giants. A previous plan was called off in February.
What benefits?
“We don’t really see the synergies between food and furniture and more information is needed on how these benefits are found,” Damon Buss, an analyst at Electus Fund Managers Ltd. in Cape Town, said by phone. “We also have questions about the difference in strategy between the two companies with Shoprite having been more organic growth traditionally and Steinhoff more acquisitive growth.”
The shares fell the most in almost four months on July 18 after Shoprite reported weaker second-half sales growth partly due to a slowdown in stores beyond its home market. Retailers including Shoprite have been relying on growth across sub-Saharan Africa to help offset sluggish trading in South Africa, where consumer confidence has deteriorated.
The company has been focused on capturing market share in three different tiers of customers, Charles Allen, a London-based analyst at Bloomberg Intelligence, said by phone. Growth in Nigeria and Angola has been “very impressive” while South African chain Checkers has also performed well, he said.
Growth in Nigeria and Angola has been “very impressive” while South African chain Checkers has also performed well, he said.
Report courtesy Bloomberg