Shoprite profit rises 17% amid tough retail conditions

Shoprite profit rises 17% amid tough retail conditions
Cape Town – Shoprite’s full-year profit rose to 17% due to its focus on giving the lowest prices while also subsidising the price of basic foodstuffs. 
Diluted headline earnings per share rose from R7.69 to R9 in the 12 months through June, which was higher than the R8.66 average that 13 analyst estimates told Bloomberg.
Trading profit was up 15% to R7.278bn, while turnover increased 14.4% to R130bn. Shoprite was trading 1.5% lower at R198.98 at 08:20 on Tuesday.
It will pay a dividend of R2.96, up from R2.43, per ordinary share. “This brings the total dividend for the year to 452 cents (2015: 386 cents) per ordinary share,” Shoprite said in a statement on Tuesday.
Shoprite CEO Whitey Basson said on Tuesday that the growing trust placed in the company by their customers was gratifying, “with the latest AMPS figures showing that 76% of the adult South African population shop at one of our supermarket brands – up from 72% a year ago”.
“There are many factors which contributed to the results we have achieved, but crucial amongst them has been an unwavering focus on ensuring the lowest prices while also subsidising the price of basic foodstuffs wherever possible,” he said in a statement.
“Rigorous cost control and more effective operating methods have enabled us to achieve this without compromising our trading profit margin which remained at 5.6%.”
“Despite intense local competition, we managed to keep market share above 30%. In June market share increased to the highest level in three years.”
“The level of efficiency with which we managed our business is also reflected in our internal food inflation.”
“Based on a monthly measurement of 81 000 product lines, it averaged just 3.5% for the period, well below South Africa’s official rate of food inflation according to Statistics SA of 7.2% for the same period,” he said.
Shoprite said the last year was a difficult period economically not only for South Africa, but also for the African continent and the world at large.
“The cost of living was compounded by the worst drought in 35 years, which has severely impacted prices of basic agricultural products,” the firm said. “As a result, the disposable income of especially lower-income consumers has come under increasing pressure.”
“This drought has had an equally debilitating effect on the economies of those countries in Southern Africa where we do business, while growth in West-African countries such as Angola and Nigeria has been stifled by the continued low price of oil on world markets and a severe lack of foreign currency.
“The strongest performance was delivered by the African division with impressive turnover and profit growth despite severe trading restrictions in some of its markets.”
Shoprite said the focus has been on becoming even more customer-centric. “Fulfilling shoppers’ basic requirements, so that they always find the products they want at competitive prices, has major implications for the way we run our business and for our relationship with customers.”
“To meet the challenge of having preferred products on the shelf in time, the group has continued to expand and refine its supply-line infrastructure in close cooperation with suppliers. At the same time staff training programmes have been greatly expanded to increase skills and build a more service- orientated culture,” it said.From Fin24 

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