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Shoprite's share price bears the brunt of the knock on effects of an economic slowdown

by , 20 October 2015

Yesterday, Shoprite Holdings released its operational update for the three months to the end of September. The retailer showed a much lower rate in turnover growth in comparison to the same period last year.

Shares paid the price on the Johannesburg Stock Exchange yesterday. And today shares continue their slide.

Let's take a closer look at what's going on…

Yesterday Shoprite shares dropped 6.33%

Yesterday, shares in Shoprite [JSE:SHP] fell 6.33% to end the day at R148.80, reports BDLive. The retailer said “its core customer base was under pressure from job cuts in the mining industry, rising electricity costs, general labour instability and a lack of job creation”.

Shoprite is feeling the brunt of a South African economy under pressure, says MoneyWeb. The retailer is amongst many who are also struggling with the impact of current “difficult market conditions” on growth.

The retailer posted growth in turnover of just 6.7% for the period July to September, says Fin24. This is sharply down from the same period last year of 12.3%.

The retailer saw a better performance at its stores in the rest of Africa where turnover grew 12.8%, adds MoneyWeb.

Shoprite struggled to grow sales over the period

Shoprite’s South African stores saw sales grow by 4.9% over the period, adds Fin24. This is in spite of inflation falling drastically from “6% in the corresponding quarter to 3.4%”.

Shoprite has a total of “1,762 stores… of which 288 are outside SA,” notes BDLive.

Nic Norman Smith, the chief investment officer at Lentus Asset Management, said the update’s contents were “pretty poor,” reports BDLive. He said the results are “potentially in line with inflation at best”.

After sliding 6.33% yesterday, at time of writing, Shoprite shares were trading 3.39% lower at R143.76.

So Shoprite is feeling the effects of South Africa’s ebbing economy and its shares are paying the price.

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Shoprite's share price bears the brunt of the knock on effects of an economic slowdown
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