Shoprite targets East Africa for expansions
Africa's biggest food retailer, Shoprite, announced a 6.4% growth in turnover for the September quarter, announcing that it would continue its international expansion programme to shore up its base.
Shoprite said sales in its South African home surged 8.1 percent with the market recording a sharp reduction in internal inflation to 0.9 percent for the quarter from the corresponding quarter’s 7.2%.
“This material drop was driven by significant price reductions of many basic commodity items such as maize meal and potatoes following supply improvements after the earlier drought conditions,” the company said in a statement yesterday.
Shoprite said that its non-South African markets had grappled with economic headwinds and reported a negative turnover growth of -1.8 percent “mainly due to the impact of lower commodity prices and the depreciation of the currencies of the three main countries where the group trades on the continent”.
Sales growth in Angola, in particular, slowed significantly after extraordinary growth of 110 percent in the corresponding quarter. Angola’s extraordinary growth was propelled by the reopening of the Palanca store last April 2016 after being closed for more than a year due to a fire that caused widespread damage to it in 2014. However analysts yesterday described the numbers as said as slightly behind expectations driven by the weaker data from markets across the continent. Damon Buss, an equity analyst at Cape Town-based Electus Fund Managers, said the numbers came off a high base.
“We did not expect Shoprite sales to slow as much as they did. They were weighed down by a high base and currency pressures on the continent. However the South African numbers were good, as Shoprite reported the lowest inflation of all the local retailers and grew volumes, indicating they’re growing their market share,” he said. “To be able to grow market share is a job well done.”
Reports have emerged that Shoprite was preparing enter into Kenya, as the local Nakumatt business struggles. Shoprite which operates which operates 2 689 stores in 15 countries including Botswana, Zambia and Ghana said it opened 20 new supermarkets and 6 furniture stores across the continent during the period.
It said its current pace of growth echoed the prevailing challenging environment and had to be viewed in context of the very strong growth of 15.7 percent in the corresponding period of the prior year.
File Image: IOL
Shoprite whose subsidiaries include Medirite and Computicket said that smaller divisions also made a good contribution to group turnover. The furniture division, reported increased sales of 8.9 percent, despite the amendments to the National Credit Act. The OK Franchise division continued to gain market share and saw a growth of 10 percent, in line with the group’s supermarket performance. The company was positive about its outlook.
“The deflationary environment is good news for consumers ahead of the important festive sales season, although consumer spending is difficult to predict, especially with further rand weakness. In the medium term, however the group remains optimistic about its operational strength and is making positive progress on its strategic priorities,”the company said.
- BUSINESS REPORT