- Poor performances outside South African operation affected Shoprite earnings.
- Currency decline and devaluation as well as inflation in Nigeria, Namibia, and Angola impacted the retail firm's financial earnings.
- The company's profit after tax fell by 18.2% to R4.3 billion ($283 million) in 2019.
The decline in local currencies against the dollar and rising inflation in other African countries including Nigeria have impacted on South African grocery firm, Shoprite Holdings' full-year financial results.
Despite this, the retailer reported significantly improved growth in the second half of 2019, driven by South Africa operation with group sales rising 74.9%.
Business Insider SSA's analysis of the report showed that sharp declines in Zambia, Angola, and Nigerian operations largely affected the overall performance of South Africa’s retail firm.
Zambia and Nigeria are part of Shoprite’s large business units. While the Namibian kwacha dropped by 29.4%, the Nigerian Naira dropped by 17.9% against the dollar during the financial period.
The company’s operation in Angola reported a 12.2% decline in turnover at constant currency.
Pieter Engelbrecht, Shoprite Group CEO, said, South Africa Supermarkets' reported a sales growth of 4.9%.
“We believe that the market share gains reflected in the most recent quarter are a testament to our core South African business being back to full operational strength.”
“Rampant inflation in recent years has reduced spending power and, therefore, our ability to maintain gross margins, whilst foreign currency shortages and an increasingly onerous regulatory environment around the importation of products have hampered availability. Despite this, we have maintained operational excellence and opened a net of eight new stores for the year.”
Highlights of the key financial performance for the year ended June 2019:
- Supermarkets outside South Africa reported turnover declined by 7.7% to R21.3 billion ($1.4 billion), inclusive of a decline in Angola supermarkets of 38.4%.
- Constant currency turnover declined by 0.9% across other African markets outside South Africa.
- Non-RSA markets like-for-like sales declined by 11.9%
- Basic headline earnings per share fell 19.6% to 780.8 cents while diluted headline earnings also fell by 19.6% to 779.9 cents.
- Trading profit decreased by 14.3% to R6.9 billion ($454.6 million)
- Diluted headline earnings per share of 779.9 cents, down by 19.6%.
- Sale of merchandise increased by 3.6% to R150.4 billion ($9.9 billion)
- The firm opened a net of 126 stores during the 12 months across the markets (2018: 154).
- Profit after tax fell by 18.2% to R4.3 billion ($283 million) (2018: R5.22 billion).
Last year, the African grocery store reported a 3.8% decline in annual earnings, the first in 19 years, hampered by foreign exchange fluctuations in Nigeria and most severely Angola market.
During the year, Angolan business was hit by a chronic shortage of foreign currency and a devaluation while foreign exchange fluctuations affected the Nigerian market.