South Africa: Shoprite Profit Takes a Knock As Strikes, Poor Economy Hit Sales

Shoprite earnings for the 2019 year was down 18.2%, as the retail group faced a "testing year".

The retailer on Tuesday released its financial year results for the year ended June 30, 2019. Its shares which opened at R140.10 slumped 5.48% to R132.41 by 09:10 before recovering to R139 by 09:32.

Key figures show that sales of merchandise grew by a mere 3.6% to R150bn. Operating profit was down 8.2% while net profit declined 18.2% to R4.2bn.

Basic headline earnings per share was also lower, by 19.6% to 780.8c. Basic earnings per share was down 17.9% to 768.2c.

The total dividend declared for the year came to 319c, 32.1% less than the 484c declared the previous year. Subscribe to Fin24's newsletter here

While Shoprite's supermarket division in SA performed well, generating 74.9% of sales, the group's overall sales declined due to a "constrained economy, inventory shortages post-industrial action and the implementation of a new enterprise wide IT system" across stores, CEO Pieter Engelbrecht said.

To keep goods affordable for customers, selling price inflation for the year was at 1.2%, similar to the year before. "We traded throughout the year with many items in key categories in deflation." At year-end, the number of products priced lower than the previous year came to 9 679. READ: Shoprite rallies, umps most since 1997

During the period, the group implemented a strategy to capture the "premium food segment" by repositioning Checkers. "The number of Checkers stores in the new look FreshX format now totals 21," Engelbrecht said. Shoprite targets 80 stores to be upgraded in the new format during the medium to long term.

Non-RSA stores disappoint

However, beyond South Africa, the group was challenged with forex shortages, currency devaluations and the aftermath of "rampant inflation" in Angola.

Supermarkets outside South Africa reported a trading loss of R265m.

"Despite no foreseen respite in short-term trading conditions in the region, we are committed to our customers in the 14 non-RSA countries in which we operate.

"We remain confident in the opportunity our entrenched position as Africa's leading food retailer will bring as the economic fortunes of the countries where we trade improve," Engelbrecht said.

Source: Fin24

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