Shoprite Records Revenue Decline Due to Currency Fluctuations in Nigeria, Angola

Shoprite Awaits Regulatory Approval On Sale Of Nigerian Outlets
Shoprite Awaits Regulatory Approval On Sale Of Nigerian Outlets

Africa’s biggest grocer, Shoprite yesterday reported its first annual earnings decline in 19 years for the year ended July 31, due to currency devaluation in Angola, foreign exchange fluctuations in Nigeria and a lacklustre showing in its home South African market and elsewhere on the continent.

Reuters reported that 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.

The grocer, which has extensive operations elsewhere on the continent, took another hit this year as key markets in Angola and Nigeria battle chronic foreign exchange shortages and tepid economic growth.

Shares in Shoprite tumbled more than seven per cent to a level last seen in August last year.

The shares were down 6.44 per cent, on track for their worst daily fall since December 2016.

Speaking on the results, the Chief Executive Officer, Pieter Engelbrecht said it was probably “the toughest (year) that I can recall.”

He cited a listeria outbreak, blamed on a tainted meat product, that forced Shoprite to conduct its largest ever product recall as one of the reasons for the low turnover.

Engelbrecht also added that two industrial actions over pay and 489 armed robberies at its stores also sapped turnover growth.

The Cape Town-based retailer said diluted headline earnings per share (EPS) for the year ended July fell by 3.8 per cent 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 per cent to 279 cents per share.

While trading in Nigeria continues to be hampered by foreign exchange fluctuations, the currency of Angola, which is Shoprite’s biggest market outside South Africa, has lost more than half its value against the United States dollar since December 2017.

This weighed on its non-South Africa operations, which recorded a decline in sales of seven per cent, while its local division reported turnover growth of 5.7 per cent.

Sales rose 3.1 per cent to 145.3 billion rand ($9.9 billion), while the rest of Africa operations contribute 18 per cent 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.

“It (the process) is still under arbitration and we should have an answer at the end of the calendar year,” Engelbrecht added.

Leave a Reply