Shoprite's early results send shares into a dive

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The Independent Online
SHARES in Shoprite, the Scottish discount food retailer, plummeted 54p to 90p following the early publication of half-year figures well below City expectations.

Pre-tax profits rose pounds 1m to pounds 2.7m. But the company warned that the final figures would be close to last year's pounds 5m compared with forecasts of pounds 9m. It blamed price competition for squeezed margins.

The shares, which started the week at 170p, have fallen heavily, prompting speculation that the information had been leaked. One analyst said: 'This was a big shock to me, but it wasn't to somebody out there. The market was not aware how much they had invested in aggressive price competition.'

Charles Good, managing director of Shoprite's Scottish operation, said the figures were published early 'because operating profit levels were adrift of market expectations'.

Shoprite was once seen as a glamour stock. But the share price has fallen gradually since a February high of 241p.

The company said that the reduced margins had not been sufficiently compensated for by a 59 per cent increase in turnover.

Mr Good said: 'The multiples have been promoting their discount lines since before Christmas and have had some success in taking market share, forcing us to cut prices further. We have, in effect, been giving customers a fair amount of money.'

Despite the squeeze, profit before tax increased due to the sale and leaseback of 14 supermarket sites, which contributed pounds 1.95m. Mr Good said this level of profit from property sales was exceptional and would not be repeated.

Shoprite is trimming plans to open 70 new supermarkets over the next year to nearer 50.

Earnings per share were 3.05p, up from 1.91p. The interim dividend is held at 0.6p.