Shoprite reports 3.8% drop in annual earnings attributed to inflations

SOUTH AFRICA – Leading supermarket chain and Africa’s largest grocer Shoprite has reported a 3.8% decline in annual earnings for the year ended June 30 showing a dwindling performance in its South African home market and the continent.

Reuters reported that the company’s drop in diluted headline earnings per share to 968.7c was mainly attributed to low food inflation in South Africa, which restricted the group’s ability to pass on non-food cost increases, and a 50% drop in the Angolan currency.

Following the announcement, Shoprite share price fell 8.11% to US$13.50, its lowest level since July 12 2017 indicating unexpected drop in earnings.

Africa on the low

Sales from non-South Africa operations declined 7% while its local division reported turnover growth of 5.7% with sales rising 3.1% to US$9.9bn.

“Non-RSA (Republic of South Africa) is still profitable, it’s not a crisis,” said Pieter Engelbrecht, the CEO Shoprite.

“It (the process) is still under arbitration and we should have an answer at the end of the calendar year.”

He added that Shoprite however remains committed to Africa as shown by its recent bid for 11 franchise stores in Botswana.

While the rest of Africa operations contribute 18% to group sales, the segment underperformed given that Angola lost more than half its value against the U.S. dollar since December 2017.

The fall in Angola as a result of currency devaluation followed two years of 60% growth in earnings from the country that was once a key and biggest market out of South Africa.

Results were also impacted by the effects of low inflation, all factors contributed by armed robberies, record fuel prices, chronic unemployment, industrial action and the first VAT hike in 25 years in the country.

In Nigeria, operations were hampered by foreign exchange fluctuations that limited imports.

‘Toughest’ year to recall

According to the chief executive, the financial year under review was the toughest to recall despite extensive operations elsewhere on the continent.

While Angola and Nigeria were battling chronic foreign exchange shortages and tepid economic growth, retailers in South Africa were struggling to lift earnings as consumer income was squeezed by elevated household debts, higher fuel prices and an increase in value-added tax.

Also, South Africa was hit by what was the world’s worst listeria epidemic that saw Shoprite conduct its largest ever product recall over ‘tainted’ meat product.

Engelbrecht said two strikes over pay and 489 armed robberies at its stores sapped turnover growth.

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