Shoprite Holdings Ltd. (SHP), South Africa’s largest food retailer, headed for its biggest two-day decline in more than five months after second-half sales slowed amid weaker consumer spending in its domestic market.
The stock fell as much as 5 percent and traded 1.1 percent lower by the close in Johannesburg. That extended its two-day retreat to 5.8 percent, the most since January. The 180 rand share price was the lowest since July 5.
Shoprite total sales growth declined to 10.4 percent in the six months through June, compared with 13.8 percent in the previous half-year period, the Cape Town-based company said in a statement yesterday.
Shoprite trades at 27.6 times reported earnings, compared to 19.2 times on the benchmark FTSE/JSE Africa All Share Index (JALSH), according to data compiled by Bloomberg.
“The retailers have been priced for perfection, and this isn’t perfection,” said Warwick Lucas, an analyst at Imara SP Reid in Johannesburg, which has a hold rating on Shoprite. “High unemployment and weaker consumer demand will make it hard for retailers like Shoprite to pass through costs.”
South African economic growth slowed to 0.9 percent in the first quarter, the weakest since a 2009 recession, as rising joblessness curbed consumer spending. The unemployment rate climbed to 25.2 percent in the first quarter from 24.9 percent in the previous three months, as the labor force expanded and the retail, finance and construction industries cut jobs.
Massmart Holdings Ltd. (MSM), the South African retailer controlled by Wal-Mart Stores Inc., also said July 9 that sales growth slowed during the first half of the year amid a downturn in consumer spending.
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