Shoprite profits up but growth slows
The retailer’s growth hit its lowest in eight years and was largely driven by operations outside of SA.
JOHANNESBURG -Shoprite today reported an eight percent increase in half-year profit but a simultaneous eight-year low in growth.
Africa's biggest grocer says headline earnings per share totalled 341 cents in the six months to end December compared with 315.9 cents a year earlier.
Sales rose 9,7 percent to R51 billion with its sub-Saharan outlets surging by about a third - more than three times the growth rate in the local sector.
But, overall, the retailer reported its slowest first-half profit growth in eight years as its core low-income consumers in South Africa struggle with high debt, job losses and rising fuel costs.
What growth it experienced was largely driven by the robust showing from stores outside the struggling home market.
Overstretched consumers are cutting back on spending in South Africa, forcing local retailers to look to the rest of the continent to boost returns.
But expansion has been slow due to lack of shopping malls and other infrastructure.
Speaking to investors and reporters at the results presentation, CEO Whitey Basson said, "It's been a tough six months."
Nearly a quarter of South Africans have no job in an economy where average household debt accounts for 75 percent of disposable income.
"What these numbers are telling you is: the consumer environment is incredibly tough in South Africa," said Reuben Bleeders, an analyst at Gryphon Asset Management.
Two local retailers - Truworths and JD Group - have separately written off a total of more than $100 million in consumer debt in the six months through December.
Listen: Basson spoke to The Money Show's Bruce Whitfield about his views on the struggling economy and its effect on his company.
Basson says while the economy is hurting his company, and that government needs to step up and improve conditions, Shoprite is still achieving growth and increasing its employment.
"If Shoprite can do it," he says, "all of us can do it."