Shoprite Sees Persistent Woes Outside South African Market

JOHANNESBURG (Capital Markets in Africa) – Shoprite Holdings Ltd. will look to cut costs outside its home market as Africa’s largest food retailer battles currency shortages and stricter regulation in several countries.

The owner of supermarket chains such as Checkers and U-Save has been growing in 14 territories outside South Africa to become a continent-wide superpower, but factors such as inflation — particularly in Angola — have hampered progress. That contributed to a 20% decline in earnings over the year through June.

“In these countries, the currencies deteriorated further in the second half and so we are looking at ways to curb costs and spending,” Chief Executive Officer Pieter Engelbrecht said in a phone interview on Tuesday. The group is “engaged with the central banks in terms of foreign exchange.”

The shares traded 9.6% lower at 126.32 rand as of 4:35 p.m. in Johannesburg, their lowest since early 2016.

That’s not to say the grocer isn’t seeing opportunities outside South Africa — it plans to open 29 stores in various countries in 2020 — and its domestic performance is keeping sales growth on an upward trajectory. Revenue gained 3.6% over the year, made up of a 4.9% increase at home and a 0.9% rise elsewhere, the Cape Town-based company said in a statement.

To reduce spending, Shoprite is considering delays to the opening of certain new retail projects, Engelbrecht said. The retailer may also close some stores in Nigeria and cut jobs.

“The operations are excellent, so we need to persevere,” he said. “But not at all costs and we have to consider to what extent we are subsidizing people with food in some of these countries.”

Shoprite cut its dividend by 34% after problems with the introduction of a new IT system and some industrial action curbed first-half earnings.

Other South African retailers also fell on Tuesday. Pick n Pay Stores Ltd., a smaller rival of Shoprite’s in South Africa, declined 6.3% to the lowest in more than two years. Woolworths Holdings Ltd. slumped 4.4%.

Source: Bloomberg Business News