SOUTH AFRICA – Shoprite, one of the largest food retailers in Africa has posted 3.3% increase in sales to US$10.89m for the year ended June despite increasing inflation and a 50% currency devaluation which hit hard its business operations in Angola.
Business Day has reported that results of hyperinflation were translated to lower revenues in the full year, sending the share price down as much as 6.5% earlier this week.
Shoprite’s share price recovered to close 3.73% lower at US$15.90, but its performance in operations outside South Africa proved to be struggling with resource prices and volatile exchange rates, according to analysts.
Angola exempted, Shoprite said non-SA supermarkets achieved a 3% increase in sales, 5.5% in turnover compared to 32.3% reported in the previous financial year.
“The group’s internal inflation decreased from 7.3% in the previous year to only 0.5% for the current year,” said the company.
Bloomberg data has shown that Angola’s inflation rate fell to 20.3% year on year in June from 20.7% in May.
Shoprite has 30 supermarkets in Angola and in the 2017 results, the firm said the country accounted for the largest share of non-South African sales where Shoprite purchased a distribution centre to improve supply chain efficiencies last year.
Non-South African supermarkets accounted for 13% of the group’s trading profit indicating difficulties in the non-SA businesses which in the recent past has earned it a high rating.
Strong SA performance despite tough trading conditions
The company said the group’s core business, supermarkets in SA, achieved 5.7% sales growth with internal inflation dropping to 0.3% from 5.9% the previous year.
Asief Mohamed, chief investment officer at Aeon Investment Management said excluding new store openings, the like-for-like sales growth was probably around 3%-3.6% in SA.
“It’s not that good but the economy is in a very difficult space at the moment.
All consumers are under pressure and the benefits from previous hikes in social grant payments are no longer available, as government has not been able to afford more increases,” said Mohamed.
In its results the group said, the improved real turnover growth combined with positive volume and customer growth reflected a strong underlying performance taking into account internal inflation.
According to Shoprite CEO Pieter Engelbrecht, the South African performance had been boosted by the continued success of the focus on Checkers’ high-end consumers.