Shoprite shares tumbled as an update from Africa’s biggest grocer highlighted the pressures customers face in core markets such as South Africa and Angola, along with the effect of weaker currencies in many countries across the continent.
South African supermarket sales rose 2.6% in the six months through December, compared with gains of 7.8% in the same period a year earlier.
Slower growth reflects South Africa’s weakened economic outlook. Lower-income consumers are struggling most of all because of higher fuel prices and increased value-added tax. Christmas sales figures underscored this, with back-to-school essentials outperforming discretionary purchases such as toys for the first time. Stagnant prices of basic foods, an area where Shoprite has a larger market share, also weighed on the retailer’s performance. Shoprite expects a better second half as the benefits from a new national minimum wage filters into food spending. The picture in the rest of Africa is worse still, with sales down 13%. Angola remains in recession, the large size of this operation dragging down Shoprite’s overall performance.
Shoprite shares were down 3.3% to R179.82 by 9:51 am in Johannesburg, a second day of declines. The stock had lost 2.2% in January before the trading update, compared with a 0.3% gain in the The FTSE/JSE Africa Food & Drug Retailers Index.
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