Lack­lus­tre re­sults won’t sway Sho­prite’s ex­pan­sion plans

Finweek English Edition - - IN THE NEWS - BY SHOKS MZOLO

The food re­tail sub- sec­tor’s re­port­ing sea­son kicked off on a poor note. This is il­lus­trated by a day-long los­ing streak in Sho­prite’s stock that was sparked by the an­nounce­ment of the re­tailer’s pos­i­tive but lower-than-ex­pected in­terim re­sults on 24 Fe­bru­ary. In re­sponse, the share lost 5.6% on the day. With the stock now hov­er­ing be­tween R160 and R170, its mar­ket cap has re­treated be­low R100bn.

Sho­prite recorded an 8.9% jump in post-tax profit, to a tad be­low R2bn, on the back of a 12.5% in­crease in turnover (to R57.5bn). Mar­gins are con­tract­ing. Head­line earn­ings per share (HEPS) rose 8.6% to 370.2. This com­pares with a 12.5% rise in head­line earn­ings in 2012 and 18.6% a year ear­lier.

The group, which spans the en­tire in­come-bracket spec­trum, op­er­ates Check­ers, House & Home, OK Fur­ni­ture, Hun­gry Lion, no-f r i l l s Usave, and Sho­prite – the f lag­ship with 420 out­lets in South Africa alone. The com­pany is now present in 15 coun­tries.

Notwith­stand­ing that de­mand for food is ar­guably in­elas­tic, Sho­prite cites macroe­co­nomic cir­cum­stances and Eskom as fac­tors in its re­sults, and ex­pects that a tough sec­ond half will “make con­sid­er­able de­mands on man­age­ment”.

A drop in oil prices, im­ply­ing an im­prove­ment in dis­pos­able in­comes, is good for con­sumers at home and many of Sho­prite’s other mar­kets while in the case of oil-pro­duc­ing An­gola and Nige­ria, this will be a damp­ener. Lower fuel prices will also help lower the group’s op­er­a­tional bill.

Sho­prite CEO Whitey Bas­son has said that the sat­u­rated and com­pet­i­tive SA, which ac­counts for 80% of the group’s out­lets, is tougher than, say, Nige­ria, which has huge scope for

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