Johannesburg - Africa’s biggest food retailer Shoprite traded much higher in almost four years, gaining as much as 11.35 percent on the JSE yesterday to close at R194.98 a share after the group released a positive operational update.
The group said it had increased its total turnover by 14.4 percent for the 12 months to June to about R130.03 billion, compared with the R113.69bn reported during the corresponding period last year.
Sales growth for the group’s non-South African supermarkets accelerated 32.6 percent, while the local operation increased by 10.9 percent.
Shoprite said the current period comprised of 53 weeks compared with 52 weeks in the previous year. On a comparative 52-week basis, turnover growth was 11.6 percent with growth of 5.5 percent.
Best performer
The group said its furniture division profit rose by 15.3 percent for the period (12.5 percent on a 52-week basis); with the OK Furniture brand being the best performer.
The other operating segments achieved growth of 12.8 percent (11.9 percent on a 52-week basis).
Shoprite and Pick n Pay Stores are among South African retailers succeeding in growing sales, despite headwinds, including weak domestic consumer confidence, rising interest rates and a slump in the rand.
The International Monetary Fund revised economic growth for South Africa this year and put it at 0.1 percent, which would be the slowest pace since a 2009 recession.
Peter Takaendesa, a portfolio manager at Mergence Investment Managers, said: “On a comparative 52-week basis, turnover growth was 11.6 percent compared to market expectations of 9 percent, so Shoprite delivered a decent growth rate ahead of market expectations.
“In addition, the like-for-like turnover growth of 5.5 percent for the year implies an acceleration to about 8 percent in the second half compared to about 3 percent in the first half of the year.”
Takaendesa added: “South African supermarkets' growth rate decelerated marginally, while the group’s non-RSA supermarkets accelerated to 35 percent growth in constant currency, compared to about 14 percent growth in 2015.
“The consumer environment is tougher in South Africa and the rest of Africa is also largely challenged by weaker commodity markets, but it looks Shoprite is executing quite well in that environment.
“We think the share price movement is largely explained by a better trading update compared to market expectations, as well as a tougher consumer environment.
“The magnitude of the share price movement also suggests that there may have been short positions in the stock, and as those get covered by buying shares in the market, then the share price jumps up this way,” Takaendesa said.
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