Africa’s biggest retail outlet, Shoprite’s shares slumped by 17%, the most since July 1999 after its first-half earnings dropped as much as 26%, extending the January decline to 17%, and the stock is down 34% over the past 12 months, compared with a 10% retreat on the FTSE/JSE Africa Food & Drug Retailers Index.
Shoprite in a trading statement released after the market close on Tuesday said it expects headline earnings per share (HEPS) including an adjustment for hyperinflation to fall by as much as 26 percent to 388.6-441.1 cents for the 26 weeks which ended on Dec. 30.
“The low turnover growth resulting from low food inflation, temporary stock availability challenges and currency devaluations combined with lower non-RSA (non-South Africa) gross margins and inflexible expense growth has adversely affected profitability,” Shoprite said in its trading statement.
Shoprite’s African operations have hit a speed bump as a recession in Angola and sharp devaluations in some of the continent’s currencies dragged down its cross-border revenue.
The 17.24% fall in non-SA revenue for the quarter end-December is a setback for the group, which has long seen its expansion into the rest of Africa as a major driver for its growth.
Under former CEO Whitey Basson, Shoprite has built a retail empire that sees it operate 308 stores in 14 countries across the continent.
For a long time its cross-border operations have been the group’s biggest growth driver, but recently it has seen its rest of Africa operation come under intense pressure.
News that revenue was down double digits in its latest quarterly results followed the group reporting a 12% sales drop to R21.4bn for its African operations in the year to end-July.
In the Angolan operation, where it operates 30 stores, sales declined 49.55% during the quarter. This performance was in contrast to when it grew sales 47.4% for the financial year to end-August 2017.
Besides the problems in Angola, currency movements also hurt Shoprite, with the Zambian kwacha falling 20% and the Nigerian naira dropping 17% against the US dollar.
OLUFIKAYO OWOEYE & OLAKOYENIKAN OLUWASEGUN
