Shoprite reports nominal turnover increase in difficult trading conditions

SOUTH AFRICA – Africa’s largest food retailer, Shoprite Group has reported a nominal turnover increase of 0.4% for the three months ended September impacted by difficult trading conditions.

According to the Business Day, the retailer was weighed down by currency devaluations, low food inflation and strikes, all heightening the stumbling block towards rolling out of its multibillion-rand new warehousing system.

Shoprite spend US$2.73 billion on capital expenditure, contrary to US$478.43 million it committed to capex in 2017, mostly directed to centralised warehouse facilities and information systems.

The ambitious capex programme has in no doubt yielded no significant results coupled with a tough trading environment.

“We had to deal with three strikes in one year, deflation, new distribution centres and the implementation of a new SAP [systems applications and products] project, which required us to train 147,000 employees,” said CEO Pieter Engelbrecht.

According to analysts, the update was disappointing especially given the high expectations implied in the share price.

Contentious pay policy

More than 40% of shareholders, up from 30% in 2017, voted against the nonbinding resolutions on the remuneration policy and the remuneration implementation policy.

65% of Shoprite’s “outside shareholders” voted against the group’s remuneration policy at the 2017 annual general meeting.

Some of its investors expressed their disapproval for the remuneration policy, some of them failing to attend the 2017 teleconference called to discuss their concerns.

According to those who were in favour of the teleconference defended their move based on the new JSE requirements, which oblige companies to engage with shareholders if more than 25% of them votes against the remuneration policy.

Retail analyst Nic Krige said it was unacceptable that the group was spending so much on capex and could only achieve a 0.4% increase in turnover.

“You would expect turnover to increase dramatically with that sort of capex. They could have bought Pick n Pay,” said Krige.