Shares in Shoprite trended higher yesterday after the retailer said it expected a 16% increase in merchandise sales as alcohol continues to boost its growth and gain market share.
In later afternoon trade, the shares were 2.82% higher at R249.71.
Investors were quick to welcome the positive operational update for the 52 weeks to July 2, 2023, in which the group said merchandise sales grew to R215 billion, while LiquorShop sales increased by 30.8%.
This after its rival Pick n Pay last week reported a decline in sales for the 20 weeks ended July 16, 2022 - a grim update that the market found a bitter pill to swallow.
Shoprite said first-half sales growth of 35.6% was elevated due to Covid-19 lockdown closures in the prior year period. Second-half sales increased by 25.9%.
Its core business, Supermarkets RSA, achieved sales growth of 17.8%, like-for-like 10.3%, contributing 80.8% to group sales.
Checkers and Checkers Hyper reported sales growth of 18.0%, while Shoprite and Usave reported sales growth of 15.6%.
Shoprite said in its reporting currency, the rand, Supermarkets Non-RSA’s sales increased by 16.4%, contributing 9.1% to group sales.
“The segment’s store base increased by a net of two stores to total 228 stores operating in nine countries, while the group added a net 340 stores during the period to total 3 324 stores from continuing operations,” it said.
The group’s furniture segment, contributing 3.3% to group sales, reported a 5.1% increase in sales for the year, and like-for-like sales increased by 2.0%. The segment’s store base increased by a net of eight stores to end the year with 434 stores.
“Sales to the Group’s OK Franchise business increased by 13.7% and after opening a net of 22 stores, the OK Franchise division ended the year with 535 stores.
“The group opened four Medirite Plus standalone stores during the period, ending the year with six standalone stores and 134 Medirite pharmacies located within our supermarket business,” it said.
Shoprite said despite it remaining encouraged by continued customer growth and continued market share gains, load shedding had a negative impact during the period.
“The cost of diesel to power generators during load-shedding across our Supermarkets RSA store base amounted to R1.3 billion. It is important to note that this cost became significant at higher stages of load-shedding which occurred from September 2022,” it said.
Shoprite said in line with its approach for the first half of our 2023 year, the group said it remained resolute in terms of its commitment to lower prices and value for customers during our second half period.
“As such, the group’s full-year gross margin will be lower than that reported last year. However, the decline is expected to be less than the gross margin decline reported in our 2023 interim results.”
On social media, investor analyst Simon Brown @SimonPB said: “The group’s core business, Supermarkets RSA, achieved sales growth of 17.8% (like-for-like 10.3%) Internal selling price inflation measured 10.1%. So real growth of +0.2% Compared to Pick n Pay of almost -10%.”
Wayne McCurrie, a portfolio manager at Ashburton Investment, (@WayneMcCurrie) tweeted, “Shoprite very good sales growth even after taking into account new stores openings. Most be gaining market share. Gross profit margin will be lower. Did also warn about R1.3bn diesel usage because of load shedding. No profit update.”
@hazelwood_dave said: “Shoprite SA increased their number of stores by 17%. That’s aggressive growth in a stagnant economy.”