Shoprite’s half-year profit drops

Shoprite Holdings, Africa’s largest supermarket group, says its first half-year earnings declined due to currency devaluation in Angola and supply constraints in its home market South Africa.
Chief Executive Pieter Engelbrecht said in Johannesburg that its diluted headline earnings per share for the 26-weeks to Dec. 30 fell to 398.5 cents from 525.6 cents in the comparable period.
The decline is a major shortfall in more than 10 years. Shoprite owns more than 2,800 outlets across Africa.
“Our first half performance is below expectations, but not a reflection of the fundamental strength of the business,” Engelbrecht said in a statement.
Deflation in basic food categories and supply constraints, stemming from strikes at its largest distribution centre, put pressure on Shoprite’s South African business.
Shoprite said the supply issues coincided with more than half of the business going live on an IT system in the six months and adversely impacted product availability for customers.
The retailer added that estimated lost store sales resulting from stock issues exceeded 1 billion rand in the period.
In the group’s Rest of Africa business, profitability suffered mainly as a result of the Angolan operation, where 85.1 per cent currency devaluation against the dollar since the beginning of 2018 caused affordability challenges.
Rest of Africa reported a trading loss of 61.8 million rand versus a trading profit of 552.7 million rand.
Analysts polled by Refinitiv had forecast a fall to 419 cents. They based their analysis on cost increases in rentals, electricity, security, transport, additional labour costs and inflation in Angola
Headline earning per share is the most widely watched profit gauge in South Africa, which strips out certain one-off items.
However, Shoprite shares were up 1.76 per cent in early trading on Tuesday because the market had already priced in the earnings and sales decline following a trading update and profit warning in January.