Africa’s biggest grocer Shoprite’s continued market dominance and growth as well as stronger earnings performance after it raised sales and operating profits for the December 2023 interim period is bad news for rival operator Pick n Pay, which plans to spin off its top-performing chain, Boxer, under an IPO.
Shoprite has performed strongly in the South African retail industry, which is battling depressed consumer spend. It grew sales for the half-year to December by 13.9% to R121.1 billion, sharply contrasting Pick n Pay’s negative growth in retail sales for the 47 weeks trading period to January 21, 2024, further to the R570-million post-tax loss for the half-year period ended August 2023.
For Shoprite, there was strong performance in all of its supermarket brands, which include Checkers, Checkers Hyper, Shoprite, and Usave. This saw interim profits lift up 4.2% to R3.4bn against the backdrop of a challenging economy characterised by load shedding.
Despite economic difficulties, Shoprite grew its market share in South Africa, adding 197 new stores to bring its total to 3 543.
Shoprite CEO Pieter Engelbrecht said yesterday: “The 14.6% increase in sales from our core business segment equates to R12.4bn in additional customer spend with us on the same period last year.”
In the same period last year, sales in Shoprite were higher by 17.5% against the prior year. The stronger sales volume for the period under review has enabled the company to raise headline earnings per share by 7.3% to R6.25 and to declare an interim dividend of R6.27, which is 7.7% higher compared to the previous contrasting period.
Market analyst Dave Hazelwood said on social media platform X that if Shoprite was “still taking market share, this was bad news for Pick n Pay”, adding that playing catch-up was going “to be tough” for the owner of Boxer. Sales growth had, however, slowed down in the first six weeks of 2024 for Shoprite.
During the period under review, the Checkers and Checkers Hyper chains had 13.7% stronger sales volumes as the group also taps into the retail value proposition that is proving to be highly lucrative, especially from a South African market perspective.
Shoprite’s private label proposition and its on-demand platform, Checkers Sixty60, which increased sales by 63.1% over the six months, also aided the sales growth momentum.
The Shoprite and Usave branded outlets increased sales by 13% over the period under review after the inclusion of 51 stores acquired from Massmart Holdings Ltd. Excluding the R2.9bn sales contribution from the stores acquired from Massmart, Shoprite’s SA supermarkets increased sales by 11.2%, with customer visits for the period increasing by 6.4% against an increase in the average basket spend of 7.7%.
“While the operating context in South Africa remains challenging and costly, especially taking into consideration the ongoing cost of diesel generators during load shedding, we are most pleased to report increase in profits and dividends for the period,” the company said.
Shoprite has said it would continue to invest in tech and digital, supply chain, stores and human resources. The South Africa chain had internal selling price inflation of 7.7% for the period compared to 9.4% a year earlier.
During the period under review, Shoprite’s total capital spend amounted to R3.7bn, with a bigger portion of this relating to “an investment in expanding the store” portfolio. Inventories closed the half year at R29.3bn, 15.4% higher on the prior year’s contrasting period.
Shoprite had net cash of R8.3bn as at the end of the period under review, with total borrowings decreasing by R15m to R6.3bn.
“The majority of the group’s borrowings remain rand denominated with an exposure of US$28m (H1 2023: US$35m) to foreign exchange movements. The borrowings-to-equity ratio decreased to 23.8%,” the company said.
BUSINESS REPORT