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The market lowdown on Shoprite, Woolworths and MTN

The market lowdown on Shoprite, Woolworths and MTN
The Finance Ghost
By The Finance Ghost
4 Aug 2024
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Considering its fantastic performance in the first half of the financial year, Shoprite could be forgiven its marginal slowdown in the second half. Woolworths didn’t bear up quite as well. MTN is showing signs of stabilising, though at a much reduced share price.

Retail wars: Shoprite and Woolworths


In case you were wondering whether anything is slowing Shoprite down, the answer is that there does seem to be a minor loss of momentum in the growth there.

But we are still talking about double-­digit growth. When the first half of the year saw growth of 13.9%, it’s not hard to forgive a “slowdown” to 10.2% in the second half.

It’s even easier to forgive when you remember that the Massmart store acquisition wasn’t in the base for the first half, so the second-half numbers are a more realistic view anyway.

The real magic continues at Checkers and Checkers Hyper, up 12.3%. The turquoise scooter army rode on, with growth of 58.1% at ­Sixty60. The group continues to resonate with shoppers in lower-income brackets as well, and Shoprite and Usave are up 10.7%. Although we don’t have a view yet on profitability for the 52 weeks to June, sales were clearly fantastic.

Woolworths cannot say the same thing, unfortunately, with a really disappointing performance for the 53 weeks to June 2024. We need to use 52-week numbers to make them comparable. An adjustment is also needed to take David Jones out of the base period. On that basis, group sales were up just 4.3% – and they grew slower in the second half, by only 3.2%.

Woolworths Food carried the team, growing 9% on a 52-week basis and at least taking the fight to Checkers. Fashion, Beauty and Home suffered a 0.4% decline in sales over the same period, while Country Road Group got properly hurt in Australia with an 8% drop in sales. Heps is down between 10% and 15%.

Woolworths might be good at selling organic yoghurt, but the rest of the group is letting the team down.

MTN in serious trouble in Nigeria


The MTN share price is really struggling to find support, having shed a third of its value this year. There are signs that it might be stabilising in the R70–R80 range, but that’s a sorry situation for a stock that was trading at over R200 in early 2022.

The African dream is turning out to be a nightmare, with problems in Nigeria once again. This time, it’s more about currency exposure than issues with the government, but it really is like playing bingo in Africa.

MTN (and Vodacom, for that matter) are struggling to grow in the primary market of South Africa, so they felt compelled to go in search of growth in Africa. That growth can come at a price.

MTN Nigeria released interim numbers and they are hideous, with ebitda down by 10.9% even though service revenue was up by 32.6%. Ebitda margin dropped by 17.4 percentage points to 35.6%. To make it worse, inflation over the period was 32.8%, telling us that the service revenue growth was only just in line with inflation.

The forex disaster isn’t just affecting shareholders translating earnings into another currency. There’s a deeper issue: letters of credit denominated in dollars are killing the business. If not for the forex losses, ebitda margin would have been 50.9%.

For a glimmer of hope, MTN Ghana has shown us what is possible in Africa. For the six months to June, service revenue was up 31.2%. That’s less than in Nigeria, but inflation in Ghana over the period was 23.9%, so this is real growth. DM

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.

You may write a letter to the DM168 editor at [email protected] sharing your views on this story. Letters will be curated, edited and considered for publication in our weekly newspaper on our readers’ views page.



 

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