South Africa’s biggest retailer has a R4.4 billion surprise for investors

Shoprite’s dividend beat estimates as profit rose, with Africa’s biggest grocer buying the Vida e Caffè coffee-shop chain and a majority stake in R&A Cellular.

These acquisitions will give it greater exposure to quick-service restaurants, as well as to the technology and payments space.

Net income climbed 6.4% to R8.08 billion in the year ended June 28, while the dividend advanced 12% to R8.73, the company said in a statement Tuesday.

That exceeded the 8.55-rand median estimate in a Bloomberg survey. 

The retailer deliberately kept selling-price inflation below food price growth, helping increase volumes.

It boosted merchandise sales in South Africa — its biggest market — by 7.1% while keeping price growth at 0.8%, well below the country’s average 3.9% increase for food and non-alcoholic beverages in the period. 

The company achieved this despite muted growth in household spending in the continent’s biggest economy, as fuel prices have risen to record levels due to the war in Iran.

Expenditure grew just 0.1% in the first three months of the year, the slowest pace in eight quarters, according to the statistics agency. 

In line with a strategy to grow its financial services offering, Shoprite bought a majority shareholding in R&A Cellular in August.

This firm operates a device network that enables informal and semi-formal micro-retailers to provide access points for everyday services in their communities while supporting their cash flow and inventory management.

The move is expected to “extend the group’s financial-services reach into the informal sector,” it said.

The economy of South Africa’s predominantly Black urban communities, known as townships, is estimated at about R900 billion annually, Clicks said last week.

Also in August, Shoprite signed a share purchase agreement for Vida e Caffè, a coffee brand that operates about 400 corporate and franchise outlets, strengthening its presence in the quick-service restaurant category.

The brand operates various formats, including high street, forecourt, drive-thru, corporate office, and retail locations, and it also has an integrated digital offering.