Shoprite Cautious on Improving Outlook after Worst First Half

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Shoprite Holdings has said its outlook could improve after its worst first-half performance in more than a decade, hit by supply problems in South Africa and a currency devaluation in Angola.

“Since January 2019, an improved sales trend is evident,” the group said in a statement on Tuesday, adding though that its weak trading in July-December last year meant it was unlikely to achieve growth for the full year ending in June 2019.

The supermarket and furniture retailer also said it aimed to simplify its share structure and was in talks with Thibault Square Financial Services Proprietary Limited to buy, redeem or cancel deferred shares held by Thibault, which owns 32.3 percent of voting rights.

South African retailers have struggled to lift earnings at home as high unemployment and household debt have squeezed consumer income.

Shoprite had fared better than many thanks to its focus on budget-conscious consumers, but it 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.

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 percent since the start of this year, were up 5 percent by 1045 GMT.

According to Reuters total group sales across Shoprite’s more than 2,800 outlets in Africa rose just 0.2 percent in July-December to 75.8 billion rand ($5.5 billion), while like-for-like sales declined by 2.7 percent from a year earlier.

More than half of the group’s business 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, Shoprite said.

Estimated lost store sales resulting from stock issues exceeded 1 billion rand ($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.