Shoprite results disapoint

Shoprite shares shrug off the group’s reported 17 percent increase in profits for the year to June, remaining flat most of Tuesday.

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Johannesburg - Shoprite shares on Tuesday shrugged off the group’s reported 17 percent increase in profits for the year to June, remaining flat most of the day.

The shares failed to live up to the 11 percent they rallied to after the group released its trading statement last month.

The shares only gained 1.47 percent in the afternoon to eventually close at R198.53, 0.23 percent lower on the day.

Peter Takaendesa, a portfolio manager at Mergence Investment Managers, said the trading update last month indicated that sales were stronger than market expectations. “The shares have not responded as much today as the market was already expecting a strong operational result.”

Shoprite reported that its operating profits rose to R7.2 billion from the R6.2bn recorded in the comparable period last year, buoyed by growth outside of the local market.

Headline earnings per share gained 17 percent to 904.4c from 772.9c per share as compared with the last period.

Read also: Shoprite trumpets higher turnover

Chief executive Whitey Basson said Shoprite’s market share in South Africa remained above 30 percent despite intense local competition.

Basson said the local market remained caught up in a low-growth trap because of factors beyond its control.

“We are delighted with the overall results we have achieved on the back of a record 1billion transactions in a single year, but especially with those from beyond South Africa’s borders,” Basson said.

Shoprite and Pick n Pay were among South African retailers that have reported increasing sales this year.

Turnover

Shoprite generated percent of trading profit from supermarkets outside of South Africa in the full year, compared with 12 percent a year earlier, and has stores in 15 African countries. Total turnover grew 14.4 percent to R130bn.

Takaendesa said the full-year results came out ahead of stale consensus numbers with both 53 weeks earnings and dividends growing beyond the market consensus of about 13 percent. He said the group was aware that consumer spending would be under ­pressure as costs like food and transport kept escalating.

“The outlook statement is optimistic given the tougher economic environment and generally impaired consumer financial health, but the acceleration in sales growth in the second half to June 2016 is encouraging,” Takaendesa said.

The board declared a dividend of 296c per share, up from 243c per ordinary share in 2015, bringing the total dividend for the year to 452c per share from 386c per ordinary share. It said the dividend, which was declared out of income reserves, would be payable next month.

Daniel Isaacs, an analyst at 36ONE Asset Management highlighted that the reporting periods were not comparable. “That is on a 53-week basis versus a 52-week base. Trading profit was up 15 percent but on a 52-week basis was up 11 percent,”Isaacs said.

Additional reporting by Bloomberg

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