South African retailer Shoprite’s profit jolts on Angola, Nigeria

South African retailer Shoprite’s profit jolts on Angola, Nigeria

South African retailer Shoprite, which recently scuffled plans to unite with Steinhoff International on Monday 21 February; reported a 15.5% jump into a half-year profit sustained by sharp sales growth In Nigeria and Angola.

 

Shoprite that is mainly known for selling groceries has grown swiftly outside its own home market with sales in other African countries, and it is now accounting for more than a fifth of the retailer’s total.

South Africa’s merger with Steinhoff International would have created an African retail goliath but the plan was called off after minority shareholders grumbled that the proposed deal would offer little value for Shoprite. Some analysts said there were no obvious interactions between the two businesses. Reported diluted headline earnings per share of 460 cents for the six months to end-December, in line with forecasts and compared with 398.2 cents a year earlier.

Sales in Angola pitched 155 percent from a year ago, while Nigerian Revenue jumped 60 percent.

Both are important growth markets for the retailer, but experienced a shortage of foreign exchange as oil revenues remained under pressure, affecting economic growth.

Despite all that, Shoprite said it was able to fund its stock requirements from its external balance sheet and kept shelves stocked while many traders in the region struggled.

“It was exceptional growth and we must be cautious because to continue at 150 percent is unlikely,” Chief Executive Pieter Engelbrecht, who acquired the reins from stalwart Whitey Basson in January, said in an investor presentation.

In South Africa, the largest of the retailer’s 15 African markets, sales grew 14 percent to 71.3 billion rand ($5.5 billion), while sales outside its home market advanced 32.2 percent to 12.9 billion rand.

Africa’s most advanced economy is expected to grow at a faster pace in 2017, but Shoprite said that would have a minimal effect on its South African customers.

“The high levels of unemployment are bound to persist with continued consumer indebtedness and shrinking disposable income,” Shoprite said.

The retailer, which also runs the Checkers and OK Furniture chains, mostly targets lower to middle income shoppers with its no-frills Shoprite and USave stores and has boosted promotional activity to support sales, it said.

Shares in Shoprite jumped more than 8 percent on Monday after the merger was called off as analysts said the details of the tie-up had been unclear.

Shoprite shares were up another 0.9 percent after the results on Tuesday, at 189.76 rand by 1042 GMT. Johannesburg’s benchmark Top-40 index was down 0.4 percent. ($1 = 13.0708 rand).

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