JOHANNESBURG Shoprite (SHPJ.J), Africa's biggest grocer, is ramping up its expansion across the continent with 47 new supermarkets as its core South African consumer base grapples with high personal debt levels and growing fuel and transport costs.
Nearly half of South Africans failed to pay back their debts for three straight months this year, prompting banks to tighten their lending criteria, while a weaker rand currency fuelled inflation and higher petrol prices.
"It's tough out there," Shoprite deputy managing director Carel Goosen said at the presentation of the company's full-year results.
Cape Town-based Shoprite, which reported an 11 percent rise in full-year profit that fell slightly short of market expectations, said it could double its stores outside of South Africa in the next four years.
Shoprite has 153 supermarkets in 16 countries outside South Africa. Those foreign outlets registered a 28 percent jump in sales in the 12 months to the end of June, nearly three times the rate of growth in its home market during the same period.
The bulk of the new stores would be in oil-rich Nigeria and Angola. The company sees scope for 44 new outlets in Nigeria and 21 in Angola in the next three to four years, Chief Executive Whitey Basson said.
After more than two years as an investor favorite, South African retailers are fast falling out favor due to concern that high personal debt levels and reluctance among banks to lend more will squeeze spending in Africa's biggest economy.
South African retail sales grew by a smaller-than-expected 1.9 percent in June, data from the government statistics office showed last week. ZARET=ECI
Shares in Shoprite, which are down about 20 percent this year, gained 3.3 percent to 166.73 rand in what analysts said was a recovery from oversold levels and optimism that its Africa focus would help it ride a slowdown in consumer spending.
"In Shoprite, you have a company that's still growing profits and paying dividends even in a tough environment and the results were not that far away from the consensus," said Reuben Bleeders, an analyst at Cape Town-based Gryphon Asset Management.
The stock is trading close to its intrinsic value, according to Thomson Reuters StarMine valuation model, which takes into account the company's most likely earnings trajectory over the next five years.
Shoprite posted an 11 percent rise in headline earnings per share to 675.4 cents in the year to the end of June, a touch below the 681 cents forecast in a Reuters poll of 11 analysts.
Headline EPS, South Africa's primary profit gauge, excludes certain one-time items.
Sales rose 12 percent to 92.7 billion rand ($9.11 billion) and the company lifted its annual dividend by the same amount to 338 cents per share.
(Reporting by Tiisetso Motsoeneng; editing by David Dolan and Tom Pfeiffer)