The Shoprite share price shed almost 2.27% to close at R202.77 on Monday following the release of a trading update that showed the group’s African operations were struggling with tough economic headwinds.
Shareholders seemed to be unmoved by the solid performance on the home front where sales were up 8.1% in the September quarter against internal inflation of just 0.9%. Overall turnover was up 6.4%.
The sharp drop in Shoprite’s inflation rate, to 0.9% from the comparative quarter’s 7.2%, is good news for consumers.
“This material drop was driven by significant price reductions of many basic commodity items such as maize meal and potatoes following supply improvements after the earlier drought conditions,” said group CEO Pieter Engelbrecht.
The real sales growth recorded in the latest quarter was ahead of the comparative quarter in the previous financial year, he said, describing it as a “considerable achievement”. The group’s non-South African supermarkets reported a 1.8% decline in turnover largely due to the effect of lower commodity prices and the depreciation of the currencies of the three main countries in which the group trades: Nigeria, Zambia and Angola.
“Sales growth in Angola, in particular, slowed significantly after extraordinary growth of 110% in the corresponding quarter,” said Engelbrecht.
The furniture division reported increased sales of 8.9% despite the continuing adverse effect on unsecured lending as a result of the amendments to the National Credit Act.
During the annual general meeting on Monday, chairman Christo Wiese told shareholders a bright spot in an otherwise grim African environment was the expected upturn in the commodity cycle, with oil and copper prices set to benefit.
Wiese said SA was perceived to be in “a very bad space” but it had been there before and had got out of it. “We’ve been through worse — in 1985 and 1986 we couldn’t get any credit overseas. This time around morale is very low and sapping — all you read about is theft and poor ethics, but there are still a lot of good things … democratic processes are alive and well.”
Asked by Sentinel pension fund manager Mehluli Ncube if shareholders should expect more surprises similar to the R1.7bn repurchase of former CEO Whitey Basson’s shares, Wiese said, “No, you can relax.”
He did not believe there had been an obligation to disclose the repurchase contract, he said. “With the benefit of hindsight we should have disclosed, it would have made less of a storm. But the ultimate test was that 95% of shareholders backed it.”
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