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Gauteng distribution glitches hit Shoprite sales

| Supplier news

A six-week strike added to teething problems in its largest distribution centre, and international operations took a heavy forex hit

Shoprite’s share price fell 4.6% to R174.50 on Monday morning after the grocery chain reported flat sales in the September quarter.

Sales suffered from distribution glitches in Gauteng, with a six-week strike worsening teething problems in its largest distribution centre, which handles more than half of the food the group sells.

“This resulted in significant lost sales opportunities, which naturally benefited some of the group’s competitors,” Shoprite CEO Pieter Engelbrecht said in the quarterly sales update.

“The situation has now normalised and a more positive volume trend is emerging in October on the back of improving product availability.”

Other reasons for the group’s turnover growing only 0.4% from the matching period in 2017 included 0.1% internal food deflation and the rand strengthening against other African currencies.

“Although some food price inflation in the next few months is inevitable given the current rand weakness and escalating transport costs, the group doesn’t foresee material increases in internal food inflation until 2019. This provides some good news for consumers ahead of the important festive season.”

The group opened 15 supermarkets in the September quarter, with 41 more new supermarkets planned before the end of 2018.

Engelbrecht said the group’s core South African supermarket business grew sales by 1.7% while its rest of Africa operations suffered an 8.6% decline measured in rand. 

The Angola kwanza depreciated by 76.3% and Zambia’s kwacha by 21% against the dollar since the beginning of 2018, Shoprite said.

“The core customer base of its Shoprite chain in particular remained under pressure from rising transport costs and unemployment.

“Checkers continued to show better growth, notwithstanding also being affected by availability issues in the broader Gauteng region,” Engelbrecht said.

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