Shoprite Plans More Store Openings to Revive Flagging Sales

  • Share price slides to one-year low after quarterly sales slow
  • Unemployment, electricity costs hurt lower-income customers

Shoprite Holdings Ltd., South Africa’s biggest food retailer, plans to accelerate a store-opening plan to help regain market share after high unemployment and rising electricity costs stunted sales growth in the first quarter.

The company will open 77 new supermarkets in the nine months through June, compared with 61 in the same period last year, Chairman Christo Wiese said at the retailer’s annual meeting in Cape Town on Monday. Shoprite lost market share to competitors in July and August, yet has been encouraged by trading in October, he said.

“We are all very aware of just how tough things are in our economy at the moment,” Wiese said. “Our challenge is to remain outperforming our rivals in the areas where we do business. That’s the challenge, that’s the measure and I for one have little doubt that we can rise to that challenge.”

South African joblessness of 25 percent, exacerbated by cuts in the mining industry, has hurt consumer confidence among Shoprite’s lower-income customers, according to Wiese, who is also the country’s second-richest man. Revenue gained 6.7 percent in the three months through September, compared with a 12 percent increase in the same period a year earlier. Rising electricity prices, fewer store openings and lower price rises in shops also hurt revenue, he said.

Shares Decline

Shoprite shares fell as much as 7.1 percent to 147.60 rand, the lowest in almost a year, and traded 5.9 percent down as of 1:43 p.m. in Johannesburg. That extended the stock’s 2015 decline to 11 percent, valuing the company at 86 billion rand ($6.5 billion).

Sales growth returned to double-digits in October, Wiese said, and the company is looking at further ways to boost the business. That may include expansion into countries in which it doesn’t yet have a presence, after a 13 percent sales increase in stores outside South Africa in the first quarter.

“The changes in South Africa will happen over time, so there is no reason for anyone to be despondent,” he said. “It’s just a tough patch, we have to fight our way through.”

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