Sho­prite may pull plug on some off­shore stores

Un­der­per­form­ing out­lets in the rest of Africa tip gro­cer into a hefty 20% drop in an­nual profit

Business Day - - FRONT PAGE - Ann Crotty and Kather­ine Child

Sho­prite will con­sider pulling the plug on un­der­per­form­ing stores in the rest of Africa, two months af­ter a weak show­ing in these su­per­mar­kets tipped the gro­cer into a hefty 20% drop in an­nual profit.

“If we have to close a coun­try we will; we’ll take the de­ci­sion no mat­ter how hard it is,” CEO Pi­eter En­gel­brecht told share­hold­ers at an an­nual meet­ing on Mon­day.

The re­view is a sober­ing real­ity check of the risks SA com­pa­nies have taken in chas­ing af­ter more than 1-bil­lion con­sumers else­where on the con­ti­nent, where most coun­tries’ fun­da­men­tal eco­nomic frail­ties are ex­posed to swings in com­mod­ity prices.

En­gel­brecht’s com­ments are also likely to turn the spot­light on his big­gest headache, An­gola, where Sho­prite’s op­er­a­tions in the 2018 fi­nan­cial year were trashed by hy­per­in­fla­tion and a more than 60% de­pre­ci­a­tion in the kwanza cur­rency in an econ­omy bat­tered by a de­cline in crude oil prices and out­put.

Sho­prite’s chair and big­gest share­holder, Christo Wiese, told share­hold­ers at­tend­ing the meet­ing that it was ap­par­ent from meet­ings with share­hold­ers over the past few weeks that “ev­ery­body is con­cerned about what our plans are for the rest of Africa”.

He said the board was con­sid­er­ing a num­ber of al­ter­na­tives in­clud­ing shrink­ing the num­ber and size of stores or do­ing fran­chise deals.

“The very last re­sort is to shut down a coun­try,” said Wiese, who has been chair of Sho­prite since 1979 and is best known for help­ing turn it from six out­lets in the 1970s into hundreds across SA and a pres­ence in a fur­ther 14 coun­tries.

He said given where the rest of Africa was in terms of growth prospects, it would be fool­ish to think it would gen­er­ate the same re­turns on in­vest­ment as SA.

Sho­prite re­ported a 4.9% de­cline in quar­terly sales on Mon­day from its out­lets in the rest of Africa, while its SA busi­ness de­liv­ered a 10.3% sales in­crease in three months to end-Septem­ber.

The weaker quar­terly per­for­mance in the rest of Africa busi­ness — weighed down by xeno­pho­bic at­tacks in Nige­ria and cur­rency de­val­u­a­tions — is a con­tin­u­a­tion of a trend seen in the 2018 re­sults, when the busi­ness suf­fered trad­ing losses of R265m.

The swing was largely

be­hind Sho­prite’s 20% drop in an­nual head­line earn­ings per share in the year to end-June.

Eq­uity an­a­lyst Bjorn Sa­muels said that Sho­prite’s com­ments left room for in­ter­pre­ta­tion.

“It could mean that Sho­prite is more se­lec­tive about al­lo­cat­ing ad­di­tional cap­i­tal to the non-RSA busi­ness or that they would look to exit op­er­a­tions which have not gen­er­ated rea­son­able re­turns.

“Ei­ther of these could be a pos­i­tive cat­a­lyst, given how bear­ish in­vestors have be­come on Africa.”

But Wayne McCur­rie, port­fo­lio man­ager at First Na­tional Wealth and In­vest­ments, did not see this as a sign Sho­prite might try to exit its African in­vest­ments.

“They are not go­ing to exit. They are go­ing to scale back.”

/AFP (See Page 4)

Em­bassy siege: Ira­nian pro­test­ers set a US flag on fire dur­ing a rally out­side the for­mer US em­bassy in the Ira­nian cap­i­tal Tehran on Mon­day, to mark the 40th an­niver­sary of the Iran hostage cri­sis. On Novem­ber 4 1979, less than nine months af­ter the top­pling of Iran’s Amer­i­can-backed shah, stu­dents over­ran the em­bassy com­plex to de­mand the US hand over the ousted ruler af­ter he was ad­mit­ted to a US hos­pi­tal.

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