Drop in alcohol sales takes Shoprite shares down 10%
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Johannesburg - Shoprite shares tumbled nearly 10 percent on the JSE yesterday after the continent’s biggest retailer flagged that alcohol sales and transportation affected its performance during the quarter to the end of September, despite increasing its sales during the period.
The group said sales increased 6 percent during the quarter under review, but the lockdown restrictions which saw its LiquorShop closed for 60 of the 91 days in the quarter, managed only a modest 3.3 percent hike.
Mergence Investment Managers’ analyst Lulama Qongqo said the group’s results tracked the performance of the country’s major retailers. “The sales growth numbers are tracking behind expectations due to their inability to trade liquor as per normal years where there were no government restrictions. However, this is temporary. The surprise here is that the liquor impact was material way beyond expectation,” Qongqo said.
Shoprite said the relaxation of lockdown regulations announced by President Cyril Ramaphosa last week was a meaningful change and came at a significant time as the group began the festive season period. “The result of this is that our sizeable retail LiquorShop business, previously restricted from trading over weekends and mid-week after 5pm, is now able to trade seven days a week,” said Shoprite.
The furniture business, made up of OK Furniture and House & Home, was a star performer as sales increased by 20.6 percent, with the segment remaining mostly cash sales based, with credit sales participation comprising 11.7 percent of sales for the quarter.
The group said the “onerous operating paradigm” at its non-South African stores had been affected further by Covid-19 restrictions.
Sales from non-South African supermarkets declined 8.4 percent as a result of currency devaluation, which negatively affected translation into the rand, which is Shoprite’s reporting currency.
Shoprite said the Nigerian business remained classified as a discontinued operation and was not included in the operational update yesterday.
“Negotiations in this regard continue, and the group hopes to finalise this transaction during the second half of our current financial year,” said Shoprite.
In August, Shoprite announced its decision to exit or cut its exposure to the Nigerian business after 15 years of operating in that country.
Shoprite said local supermarkets – comprising Shoprite, Usave, Checkers and Checkers Hyper – continued to report market share gains over the quarter, and sales excluding LiquorShop jumped 7.2 percent.
The group said its rewards programme surpassed 12 million sign-ups.
It said half of the sales gained on sign-ups for the loyalty programme at Shoprite-branded stores five weeks after its launch.
“The Group’s Xtra Savings Rewards Programme is an important foundational building block for the group, allowing us to execute on our precision retailing objectives,” said Shoprite.
Shoprite’s branded stores launched the rewards programme in mid-October with the promise of giving customers instant discounts of up to 40 percent off on everyday essentials.
The rewards programme was established a year after the launch of the Checkers loyalty programme, which has more than 5 million customers signed up.
Shoprite said last month that Checkers had put more than R1 billion back in the pocket of consumers through savings and discounts in the last year.
Qongqo, however, questioned the active membership of the rewards programme.
“It looks like it is the biggest loyalty programme in South Africa. However, the number isn’t directly comparable, as Pick n Pay reports active members, so I think the more important question is how many of that 12 million are active,” said Qongqo.
Shoprite shares slightly recovered and closed 8.39 percent lower at R132.22 on the JSE yesterday.