Perfect timing by Whitey as Shoprite hits trolley-wobble
Basson is far from the scene of the worst-ever results reported by a group he built from modest beginnings
So now we all know that former Shoprite CEO Whitey Basson was not only an outstanding retailer, he was also pretty good with timing.
Two years after handing over the reins to Pieter Engelbrecht, Basson looks to be far enough away from the scene of the worst-ever set of results reported by a group that he built from modest beginnings.
However it is worth considering that some of the factors on the shopping list of problems that have hit the group are consequences of decisions taken during Basson’s leadership – in particular the expansion into Africa and the aggressive commitment to capital expenditure, much of which was devoted to developing state-of-the-art distribution facilities.
Whether or not a decision is brilliant is often determined by timing. In a year or so Engelbrecht may look like a hero.
Over the coming months analysts will be keen to work out whether Shoprite’s disastrous first half figures are part of an unavoidable earnings cycle faced by a retailer prepared to make the sort of bold decisions necessary to underpin sustained profit growth. Or whether the group, under an energetic new CEO, has hit a speed bump that could set it off course for an uncomfortably long period.
Certainly, Shoprite’s past success in Africa, which was in stark contrast to other SA retailers, has helped to enhance its rating over the years. But the more recent decision to build critical mass in Nigeria and Angola now looks to be a bit of a timing disaster. Of course, in a year or two that could change.
Likewise the massive capex commitment, around R40bn in the space of a few years, was taken during the Basson era. Whether or not this was too ambitious, or will hit problems under Engelbrecht that might have been avoided by Basson, will become apparent in the coming months. Similarly with the cost overruns.