EDITORIAL: Debt-laden balance sheet compounds Shoprite woes
Group’s enormous capital expenditure over the past few years was always going to be a strain
It’s never a good time to have a debt-laden balance sheet. But August 2019 was probably the worst time in Shoprite’s 40-year history to reveal a disturbing increase in borrowings. The revelation coincided with a disappointing 19.6% drop in profit for financial 2019. In recent months JSE investors have become hypersensitive to debt; the combination of high debt and declining earnings is just the prompt they need to abandon a share.
The debt wasn’t quite out of nowhere: the group’s enormous capital expenditure over the past few years was always going to put some strain on a balance sheet more accustomed to gearing in the low twenties. But a 68% increase in borrowings at this stage of the economic cycle has created jitters among even diehard Shoprite fans — of whom there are still many...
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