South African retailer, Shoprite shares have slumped the most since 1999 .
This comes after Africa’s biggest grocer said first-half earnings dropped as much as 26 percent.
It warned of a steep drop in half-year headline earnings on Tuesday, citing foreign exchange setbacks and other factors.
At market open, shares in Shoprite plunged more than 16 percent before paring loses to trade 10.7 percent weaker at 159.47 rand at 0936 GMT
Shoprite in a trading statement released after the market close on Tuesday said it expects headline earnings per share (HEPS) including an adjustment for hyperinflation to fall by as much as 26 percent to 388.6 – 441.1 cents for the 26 weeks which ended on Dec. 30.
Excluding the hyperinflation adjustment, the company expects HEPS to fall to 334.9-387.4 cents
“The low turnover growth resulting from low food inflation, temporary stock availability challenges and currency devaluations combined with lower non-RSA (non-South Africa) gross margins and inflexible expense growth have adversely affected profitability,” Shoprite said in its trading statement.
The supermarket operator and furniture retailer also recorded numerous once-off costs.
Last Tuesday, Shoprite, which owns more than 2,800 outlets across Africa, reported flat half-year sales, held back by a strike at its largest distribution centre in South Africa and sharp currency devaluations elsewhere.
Vestact equities portfolio manager, Byron Lotter said the retailer is beginning to see the impact of those poor sales on their earnings numbers adding that when a company is facing increasing costs but sales are flat, earnings are going to decline,”
In South Africa the retailer has seen cost increases in rent, electricity, security, transport and depreciation, it said.
Shoprite is confident of improvements in the second half of 2019 as the impact of various once-offs continues to ease..
Copyright: News Central TV
All rights reserved. This material, and other digital content on this website, may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without prior express written permission from News Central TV.