Shoprite posts higher profit, but CEO warns about economy's woes

Shoprite CEO Whitey Basson.
Photographer: Trevor Samson

Image source: BDlive

"We blame lots of people like China for not buying anything. The real problem is that we’re not performing to a level of efficiency that we should be, to get the economy going. This is the biggest problem Shoprite has had to cater to in the financial year," he said at the group’s half-year results presentation on Tuesday.

Basson was unimpressed by the recent meetings between business leaders and the government to discuss the economy. "We think it’s a step in the right direction. But I was a bit disappointed — we didn’t get to anything that’s constructive," he said.

Questions had to be asked about the management of state entities, he said. "We should be careful that we don’t keep ourselves busy with fanciful Star Wars projects," he said, referring to the government-business meetings.

This is not the first time the Shoprite leadership has chastised the Zuma administration.

In its 2014 annual report, chairman Christo Wiese said SA’s sluggish growth would continue until there was a concerted effort by the government and other stakeholders to address the economy’s structural problems.

That there was some consultation between the government and business on the economy was welcomed, but as CEO of the largest private-sector employer in SA, Basson said he had earned the right to criticise. "We paid R1bn in direct taxes to the fiscus," he said, lamenting onerous visa, passport and healthcare processes.

Shoprite employs about 136,076 people and has 2,188 stores in 15 African countries.

It has withstood the poor economic environment to report strong first-half profit. In a cutthroat retail environment, it on Tuesday said sales had risen 8.8% to R62.5bn, with inflation of 2.2% in the six months ended December, as it kept a lid on price increases.

Households, especially those in the middle and lower income groups have come under severe strain as rising costs, high unemployment, and debt curb spending. Basson said the group had subsidised basic foodstuffs, such as bread, milk and rice, "putting money back in the pockets of consumers, while also driving volume growth in those product categories".

Retailers tend to lower prices to ward off rivals and keep customers, rather than as a gesture of goodwill. Profit for the period increased 12% to R2.2bn, from a 9% rise previously. Supermarkets RSA — its core chain — grew sales 7.2%.

"The effects of a weak currency, as well as a devastating drought, have begun to be felt, with initial increases in the price of staples such as maize, cooking oil and similar essentials," the group said.

Momentum Wealth’s Wayne McCurrie said the group’s numbers were "not bad", given the environment. "The results were reasonable. Profit growth wasn’t fantastic in relation to the share price — it’s still a very highly rated share; it’s got a relatively high (price:equity) ratio (18.7). I would have thought that the market was expecting more than 10% earnings growth," he said.

Upmarket retailer Woolworths earlier this month warned conditions were expected to become more difficult.