Surprise as Shoprite annual profits fall, a first in 19 years

22 Aug 2018 16:40pm

Shoprite has reported its first annual earnings decline in 19 years owing to currency weakness in Angola and a weak performance in the South African market and elsewhere on the continent, Moneyweb flashed the news this week.

This sudden twist of developments comes in the wake of an infamous attempt to sue its Namibia workers for a strike of three years ago which got withdrawn at the ninth hour after citizens took to the streets protesting.

The grocer continues to steer along unpredictable waters and has faced a consumer boycott, although this has not been seen to be impactful as consumers continue flocking its outlets.

On the other hand, the labour ministry is not happy with Shoprite’s labour relations and wants these ironed out as soon as is humanly possible.

The disappointing results also come right in the heels of analysts having predicted earnings for this biggest grocer in Africa to go up by 8.2%.

 

“South African retailers have struggled to lift earnings as elevated household debts, higher fuel prices and an increase in value-added tax squeeze consumer income,” reported Nqobile Dludla of Reuters.

 According to the reporter, shares in Shoprite tumbled more than 7% to a level last seen in August last year.

Dludla quotes Chief Executive Pieter Engelbrecht who remarked that it was probably “the toughest (year) that I can recall.”

She quotes him further saying a listeria outbreak, blamed on a tainted meat product, that forced Shoprite to conduct its largest ever product recall, two strikes over pay and 489 armed robberies at its stores sapped turnover growth.

According to Dludla, some of the major highlights for the Cape Town-based retailer are diluted headline earnings per share (EPS) for the year ended July which fell by 3.8% to 968.7 cents, compared to a predicted 8.2% increase, or 1 090 cents, estimated in a poll of 10 analysts by Thomson Reuters’ I/B/E/S.

The company last reported a decline in diluted headline EPS in its financial year ending in 1999. Diluted headline EPS, the most widely watched profit gauge in South Africa, strips out certain one-off items, says Reuters.

 Equities trader with Cratos Capital, Greg Davies is quoted as well saying, “The fact that they cut the dividend, I suppose the market is saying the consumer looks like it’s under more pressure than they realised and it’s quite a disappointing set of earnings.”