Shoprite records first annual profit drop in 19 years

Shoprite has reported the first decline in its annual earnings in 19 years, due to currency devaluation in Angola and a lackluster showing in its home South African market and elsewhere on the continent.

Shoprite, Africa’s biggest grocer, with extensive operations on the continent, took another hit this year as key markets in Angola and Nigeria battle chronic foreign exchange shortages and tepid economic growth.

Trading in Nigeria continues to be hampered by foreign exchange fluctuations which have limited imports and therefore ranges in stores, while in Angola, Shoprite’s biggest market outside South Africa, the currency has lost more than half its value against the U.S. dollar since December 2017.

Gross profit increased from R33.8 billion in 2017 to R34.7 billion in 2018. Profit before tax however dipped from R7.6 billion rand in 2017 to R7.3 billion rand in 2018. Profit after tax also dropped from R5.4 billion in 2017 to R5.2 billion in 2018.In SAR (South African Rand) terms, Nigerian operations declined by 1.9 percent. In Naira terms however, they grew by 4.0 percent. Shoprite also acknowledged the effects of the foreign exchange crisis and recession in the last few years, on its website; the company also stated that trading in Nigeria had been stifled by limited product ranges.

Chief Executive of Shoprite, Pieter Engelbrecht said it was probably “the toughest year that I can recall.

“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”, Engelbrecht said.

The Cape Town-based retailer said diluted headline earnings per share (EPS) for the year ended July fell by 3.8 percent to 968.7 cents. 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.

Shoprite, which targets lower-income consumers with discounts on staples such as maize meal and potatoes, slashed its final dividend by 14 percent to 279 cents per share.

The impacts in Nigeria and Angola weighed on its non-South Africa operations, which recorded a decline in sales of seven percent, while its local division reported turnover growth of 5.7 percent.

Sales rose 3.1 percent to 145.3 billion rand ($9.9 billion). Rest of Africa operations contribute 18 percent to group sales.

“Non-RSA (Republic of South Africa) is still profitable, it’s not a crisis,” Engelbrecht said, adding that the grocery chain store remains committed to Africa as shown by its recent bid for 11 franchise stores in Botswana.