Shoprite sees rising SA confidence fuelling growth | Fin24
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Shoprite sees rising SA confidence fuelling growth

Feb 27 2018 11:46
Janice Kew and John Bowker, Bloomberg

Johannesburg - Shoprite [JSE:SHP] said rising consumer confidence in South Africa could fuel higher sales growth as the food retailer increased the dividend and reported market share gains in its home country.

The half-year payout to shareholders will be raised by 14%, about in line with a year ago, Shoprite said in a statement after the market closed on Monday. That followed a six-month period in which the Cape Town-based company extended its lead over local rivals and positioned itself to build on that dominance.

“There is definitely a groundswell of optimism” in South Africa, CEO Pieter Engelbrecht said at a presentation in Cape Town on Tuesday. “I am optimistic about the economy and that growth will come.”

The owner of chains including Shoprite and Checkers is adding stores at home and in sub-Saharan Africa, even as business conditions in many countries have been subdued by weak commodity prices and a shortage of foreign exchange.

There’s been an outbreak of optimism as Cyril Ramaphosa won the presidency from Jacob Zuma, vowing to boost the economy and fight endemic corruption.

Shoprite shares rose 2.3% to R263.88 as of 9:03 in Johannesburg, valuing the company by sales at R156bn.

Steinhoff link

Shoprite’s biggest shareholder is Christo Wiese, the billionaire whose net worth has more than halved since the share price collapse of global retailer Steinhoff International [JSE:SNH] late last year. Wiese had been in the process of combining Steinhoff’s African retail [JSE:SRR]operations with Shoprite before the accounting scandal broke, only to abandon the plan as the value of his holdings crashed.

Steinhoff Africa Retail, or STAR as it’s known, had been in line to take a 23% stake in Shoprite with majority voting rites as part of the Wiese-orchestrated deal. Steinhoff owns about 77% of STAR.

There are no talks underway about reviving the tie-up, Wiese said at the Shoprite presentation, adding that he was satisfied with the retailer’s financials.

Shoprite’s shares have been relatively unaffected by the Steinhoff crisis. After an initial decline, the stock has gained 11% since the accounting wrongdoing was announced on December 5 and is this year’s fourth-best performer on the FTSE JSE Africa Top 40 Index.

Shoprite said it’s sticking with a plan to enter Kenya before the end of 2018, where it’s taking advantage of the decline of Nakumatt. Otherwise the company will carefully consider any further advances.

“We’re not in a rush to jump into anything,” Engelbrecht said. “It’s got to be right.”

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