Lacklustre results won’t sway Shoprite’s expansion plans
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