Reuters reports that:

“South African fashion, food and homeware group Woolworths Holdings Ltd expects full-year headline earnings per share to increase by 15-25 percent, the group said on Wednesday.

But the company said its provision for bad debt rose as higher interest rates made for a tougher debt collection environment, and its shares fell.

“If they come in on the lower side of that (earnings) guidance, it will be disappointing,” Renaissance Asset Management head of research, Nothando Ndebele, said, adding growth in bad debts was concerning and was eroding profit.

Headline EPS is the key profit measure for South African firms and excludes certain non-trading, capital and extraordinary items.

Woolworths said its net bad debt provision, as a percentage of its gross book, increased to 7.0 percent in the year to end June from 5.5 percent in the previous financial year.

South African retail companies have benefited from buoyant consumer confidence stoked by a growing black middle class and tax cuts but analysts are concerned a string of interest rate hikes from the middle of last year could curb growth.”