Shoprite Food Sales Slow as South African Inflation Climb

Shoprite Holdings Ltd., Africa’s largest grocer, said it’s looking to expand stores even as its core South African market remained sluggish.

“Cost-of-living increases have hit our customers hard,” Chief Executive Officer Whitey Basson said at a presentation in Johannesburg today. “We do think you need to spend money on expanding, on new stores, during a depressed economic environment as that’s where growth will come from when the trading environment improves.”

Shoprite plans to open 74 supermarkets through June, with 13 in Africa outside if its home market, bringing its total supermarkets to 1,085 stores by the end of its financial year.

First-half profit increased 7.4 percent to 1.82 billion rand ($169 million), Cape Town-based Shoprite said in a statement today. Revenue rose 10 percent to 51 billion rand in the six months through December, with sales at supermarkets in South Africa rising 7.6 percent as high unemployment and inflation weighed on consumer spending. Revenue across 15 other African countries increased by 15 percent, excluding currency swings. In rand terms, sales at its non-South African supermarkets rose 28 percent.

Shoprite shares fell 1.9 percent to 140.53 rand at the close in Johannesburg, the lowest price since Feb. 21. The stock has slumped 14 percent this year.

“The backbone of Shoprite’s customer base is under severe pressure,” Andrew Bryson, a derivatives trader at Nedbank Private Wealth in Johannesburg, said by phone today. “If you compare the outlook for Shoprite’s main customer and Woolworths, it’s quite a contrast.”

Woolworths Rising

Woolworths Holdings Ltd., a South African retailer that sells international clothing brands and organic food, reported a 16 percent gain in first-half sales last week, boosted by demand from from higher-income shoppers. South African retail sales growth weakened to 3.5 percent in December from a revised 4.4 percent the previous month.

South African “middle- and lower-income consumers, many of them overburdened with debt, are struggling to make ends meet due to spiraling increases in their living expenses and transport costs,” Shoprite said in the statement.

The furniture unit’s sales climbed 11 percent, compared with a 4.8 percent increase a year earlier. The growth is in contrast to JD Group Ltd., South Africa’s biggest listed furniture retailer and a provider of unsecured loans, which reported a net loss in its first-half.

Shoprite was among several local retailers that closed stores on December 15 for the funeral of former South African President Nelson Mandela. The decision cost about 260 million rand in sales, it said.

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