Africa’s Biggest Food Retailer Beats Estimates as Sales Rise
(Bloomberg) -- Shoprite Holdings Ltd. full-year profit rose 17 percent, beating analyst estimates, as Africa’s largest food retailer benefited from growth outside of its home market of South Africa.
Headline earnings per share, which exclude one-time items, rose to 9 rand a share in the 53 weeks through June from 7.69 rand, the Cape Town-based company said in a statement on Tuesday. The average of 13 analyst estimates was 8.66 rand, while the retailer reported 8.67 rand for 52 weeks. The board declared a total dividend of 4.52 rand, a rise of 17 percent.
“We are delighted with the overall results we have achieved on the back of a record one billion transactions in a single year, but especially with those from beyond South Africa’s borders,” Chief Executive Officer Whitey Basson said in a separate, e-mailed statement. “We see the rest of the African continent as the source of much of our future growth.”
Shoprite and Pick n Pay Stores Ltd. are among South African retailers that have reported increasing sales this year, even as slowing economic growth weakens consumer confidence in their home market. The companies are expanding on the continent to tap demand from a rising middle class and access areas previously under served. Shoprite generated 17 percent of trading profit from supermarkets outside of South Africa in the full year, compared with 12 percent a year earlier, and has stores in 15 African countries.
Growth in Adversity
The shares rose 1.8 percent to 202.57 rand at 10:05 a.m. in Johannesburg. The stock has gained 42 percent this year and is the best performing non-mining company on the FTSE/JSE Africa Top 40 Index.
Sales gained 12 percent on a 52-week basis, driven by a 29 percent increase outside South Africa. The rise elsewhere on the continent was achieved despite weaker local currencies relative to the U.S. dollar and the negative effect of depressed commodity prices, while growth in West African countries has been stifled by a lower oil price and a shortage of foreign currency.
“The strength in the operating performance in the non-South African supermarkets is especially impressive, given the difficult trading conditions," Charles Allen, an analyst with Bloomberg Intelligence, said in e-mailed comments.
Shoprite opened 22 new supermarkets outside South Africa during the year, mostly in Angola, Zambia and Nigeria. Sales growth was led by Angola, where the company said it’s not restricted by a severe shortage of foreign exchange in the country and is able to restock its 29 supermarkets on an “almost continuous basis.”
“I’m not sure how they managed to keep the Angolan stores fully stocked but this clearly gave them a competitive advantage which improved sales and earnings,” Allen said.
In South Africa, Shoprite opened 57 supermarkets during the year and increased sales by 8.1 percent on a 52-week basis. Trading conditions in the retailer’s home market will probably remain tough, the company said, with economic growth seen at zero percent this year.