markets

Shoprite Shrugs Off Steinhoff Slump to Chart Its Own Course

The two South African retailers were natural bedfellows. They shared a billionaire shareholder and chairman and each had plans for European expansion.

Then Steinhoff International Holdings NV imploded, torpedoing its collaboration with Shoprite Holdings Ltd.

Before Steinhoff uncovered accounting irregularities in early December, Chairman Christo Wiese had embarked on an ambitious project. To bring all his Africa retail assets under one roof, he devised a way to merge the company’s operations on the continent with Shoprite, the continent’s biggest supermarket chain, in which he’s the biggest investor.

That process was well under way when the Steinhoff scandal broke on Dec. 5, leading to an almost 90 percent plunge in the furniture retailer’s share price.

“There is no sense in that now -- it’s off the table for good,” Shoprite Chief Executive Officer Pieter Engelbrecht said in an interview after he presented half-year results in Cape Town on Tuesday. Steinhoff’s “mess must be cleaned up.”

At Shoprite’s previous outing to report financials in August, Engelbrecht had been looking forward to the opportunities that might have arisen from collaboration. An expansion into Poland, for example, would be an “easy foray,” he said at the time, in part due to the ability to share operations and expertise with his erstwhile partner.

That’s all changed now.

“Progress in Eastern Europe has slowed down a bit with the whole Steinhoff scenario,” the CEO said. “It’s now a wait-and-see game.”

Yet Shoprite has managed not to let Steinhoff’s demise distract the company from its own growth plans. While the shares suffered a little contagion late last year, they have long since recovered and are trading at record levels. Investors celebrated a 14 percent interim dividend increase to send the stock higher still on Tuesday, while Shoprite has increased the grocer’s lead in South Africa, its biggest market.

As for expansion, Engelbrecht is busying himself with a planned move into Kenya, where he looks to fill a hole left by the struggling Nakumatt Holdings Ltd. chain.

“We are not willing to take too big a risk,” the CEO said. “There are lots of things on offer or available, but they are big purchases and most of it is too big in terms of our risk profile.”

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