Shoprite Holdings see some positive outcome despite recording its worst first-half performance in more than a decade. The South African company made the disclosure after recording an improvement in sales last month.
In a company statement, Shoprite had disclosed that since January 2019, an improved sales trend is evident, but the retail company is unlikely to achieve growth for the full year ending in June 2019.
According to Shoprite, the weak trading recorded in July-December last year makes it almost impossible for the company to hit full-year growth by the second quarter of this year.
Reason for fall in growth
Shoprite growth performance was hit by supply problems in South Africa and a currency devaluation in Angola. South African retailers have struggled to lift earnings at home as high unemployment and household debt have squeezed consumer income.
The company was hit in July-December by deflation in basic food categories and supply constraints stemming from strikes last May and June at its largest distribution centre in South Africa and a new IT system.
Though Shoprite had fared better than its competitors due to its operating model of focusing on budget-conscious consumers, the company also faced rising costs across markets. Although investors took the view that the worst may be over and Shoprite shares, which have lost more than 10 per cent since the start of this year, were up 5 per cent by 10:45 GMT.
In a report, Shoprite’s business, more than half, went live on an IT system, which covers inventories, orders and store operations, in the six months and that adversely affected product availability for customers, the grocery supermarket said.
Sales performance
According to Reuters total group sales across Shoprite’s more than 2,800 outlets in Africa rose just 0.2 per cent in July-December to 75.8 billion rands ($5.5 billion), while like-for-like sales declined by 2.7 per cent from a year earlier.
Estimated lost store sales resulting from stock issues exceeded 1 billion rands ($72.15 million) in the period, the retailer said.
In Angola, its fourth biggest market, an 85 per cent currency devaluation against the dollar since the beginning of 2018 has depressed revenues.
Future plans
Shoprite is in talks with Thibault Square Financial Services Proprietary Limited to buy, redeem or cancel deferred shares held by Thibault, which owns 32.3 per cent of voting rights, while the Supermarket also intends to simplify its share structure.
