Shoprite half-year earnings rise, but trouble ahead

South African retailer Shoprite reported a 55,1% rise in half-year headline earnings per share, as an emerging black middle class spent freely, but said it faced tougher times in the year ahead.

Diluted headline earnings per share—the main profit measure in South Africa—rose to 128,4 cents, while revenue climbed 21,7% to R19,105-billion.

Shoprite chief executive Whitey Basson said there was growth across all divisions, excluding furniture.

But the company said the trend was unlikely to continue as the domestic economy cools and consumers feel the effects of higher domestic interest rates, which have risen by 400 basis points since June 2006.

Economists expect South Africa’s economy to lose some steam this year, especially as an energy crisis takes its toll.

“The board does not expect the very good results of the first half of the financial year to be maintained for the full year,” it said in a statement.

“Although the food sector does not feel the effects of an economic downturn as immediately or acutely as some other sectors, it is not immune to it. Global pressures are also expected to impact on the local economy and the outlook is bound to worsen further especially in the short term.” - Reuters

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