Shoprite announces mid-year results
The six-month to December 2014 for Shoprite was reasonably successful taking into account what is happening both in SA and elsewhere in Africa. Considering the country’s low growth rate, Shoprite managed to achieve sales growth of 9,7% for Shoprite, 12,9% for Checkers and 13,1% for U-Save.
“Like-for-like” stores grew by 5,1% while the overall group grew by 12,5% due the opening of new stores throughout the continent.
The opening of new stores is a phenomenon that continuously grows irrespective of the overtrading within SA but the opportunities are wide open elsewhere in Africa. Over the last 12 months, 124 new stores have been opened and this programme will continue well into 2016. Proposed openings for Nigeria alone number 25 while twenty three new stores are planned for Angola. This aggressive programme results in enhanced depreciation for the group (23,4% higher than last year), but it is a price Shoprite is prepared to pay for the next 5 to 7 years of a store’s life as they look at the long term.
Sales for 6 months have reached a record R57,5 billion (12,5% increase on last year), while trading profit attained was R3 billion (+11,6%) with a trading margin of 5,23%, the highest amongst its South Africa peers and better than many international operators.
Shoprite is now trading in 15 African countries out of 2 020 stores and they claim to be looking at opportunities both in Africa and elsewhere.
Whitey Basson, Shoprite CEO, indicated his concern that only 100 farmers are now responsible for producing up to 70% of South Africa’s agricultural needs and he looked forward to the Minister of Finance speech for future planning.
Challenges in Africa include the drop in the oil price for some oil-producing countries, the volatility and depreciation of the Rand as well as local currencies and political instability by Boko Haram, which, thus far has not impacted the group’s operations in Nigeria.
Electricity load shedding is affecting the group in a big way. Having just spent R160 million in additional generators, Mr. Basson indicated that in December 2014, the company spent R8 million in diesel fuel alone, an unbudgeted expense, and he admitted that gross margins will have to be re-looked at to cover these extra expenses.