Shoprite defies economy to grow jobs and turnover
Over 70% of South Africans are now buying their groceries from the Shoprite Group and with the African retail giant generating 84% of its supermarket turnover within the domestic market; it is weathering the current market pressures with some agility. It is also generating more jobs, with 53 new stores opened in South Africa during the six months ended December 2014.
Announcing the results of the Group as a whole, for the six months to December 2014, Chief Executive Whitey Basson said the Group achieved a pleasing performance with turnover growth accelerating to 12.5%, reaching a total of R57.469 billion, while trading profit rose 11.6% to reach just over R3 billion. Since December 2013, the retailer created 13 183 new jobs. It currently employs just under 130 000 people.
The trading margin remained almost unchanged at 5.23%. Diluted headline earnings per share increased by 8.6% to 370.2c while the dividend was raised 8.3% to 143c per share.
Basson said all divisions, in South Africa and elsewhere on the continent, had produced satisfactory results, given the largely negative trading conditions that prevailed. This was a demonstration of the Group's ability to overcome such obstacles as poor domestic economic growth, and elsewhere in Africa, the lower commodity prices and civil conflict.
He said that according to the latest AMPS survey, over 71% of all South Africans – more than 28 million people - shop at the Group’s outlets. The Group is now classed the 107th largest retailer in the world, 41 places ahead of its nearest rival, according to the 2015 Deloitte Global Powers of Retailing report.
Its supermarkets in South Africa has enjoyed 8 years of consecutive market share growth, and accelerated sales by 12% to R42.867 billion, which is well ahead of the industry growth of 8.2% for the same period according to Nielsen. Internal food inflation was restricted to 5.2%, markedly below the official food inflation figure of 8.2%. Savings generated by the lower fuel price were used by the Shoprite brand in particular to lower or stabilise basic food prices in its 411 supermarkets, in the process highlighting its price leadership position.
Basson believes the Checkers brand, which increased turnover by 12.9%, continued to win share of the higher income consumer segment, still having considerable growth potential in many of the more affluent parts of the country. He said the small-format Usave chain, which offers a smaller product range at deeply discounted prices managed to grow sales by 13.6% through its 270 outlets in South Africa and also raised its market share.
The sale of the Group's Tanzanian outlets and the burning down of the supermarket in Palanca, Angola contributed to comparatively slower growth in Supermarkets Non-RSA. Sales growth in constant currencies however quickened from the corresponding period, up 15.4%. If the Tanzanian sales figures and those of Palanca are excluded from the previous six months’ figures, total sales growth would have been 20.3%.
Basson said the Group remained committed to its long term vision of a continent on the rise, with a developing consumption economy on the back of a young and growing 300 million strong middle class.
“Fourteen new supermarkets will open outside of South Africa by the end of the financial year and a further 32 are confirmed by June 2016. Additional opportunities are in the pipeline post 2016, including options in countries like Angola and Nigeria, where Shoprite’s 11 stores last year sold 60 times more Guinness than the 136 LiquorShops where it is ranged in South Africa,” Basson said.
The furniture division also experienced solid growth, with sales increasing by 12.2% against internal price inflation of 2.6%. It opened a net 28 new stores during the review period and is planning a further 68 in the second half of the financial year. Of these, 53 will be in premises previously occupied by the Ellerines chain after successful negotiations with landlords to take over the rental contracts.
Looking ahead, Basson said he expected the present tough trading conditions in the domestic market to be further aggravated in the second half of the year by the disruptive influence of Eskom’s erratic load-shedding. “We are nevertheless confident about the future as we believe we are better equipped than most to deal with its challenges given our comprehensive forward planning, the size and depth of our infrastructure and the quality and the extensive combined retail experience of management.”
View the results here.