The outlook for Shoprite is “pretty solid” and supermarket retailers in general should show real growth in the year ahead in line with forecast economic growth of between 3 percent and 4 percent, said Chris Gilmour, an equity analyst at Absa Investments.
However, he added that all retailers were likely to remain under pressure due to significant job losses in South Africa in the last two years.
Shoprite, the largest food retailer in Africa, on Tuesday reported a 9.5 percent rise in turnover for the six months to December helped by festive season sales and despite a softer performance from its furniture business and the effects of the strong rand on operations outside South Africa.
The group said in a statement yesterday that turnover for the six months to December last year grew 9.5 percent to R36.3 billion despite internal deflation averaging 1.2 percent during the period. Growth on a like-for-like basis was 2.8 percent. The group ended the period strongly with sales growth of 11.9 percent for December. Shoprite is the first retailer to report festive season sales.
The Shoprite group operates 1166 corporate and 270 franchise outlets in 16 countries in Africa and the Indian Ocean Islands, and reported turnover of R67.4 billion for the 53 weeks ended June 2010.
Whitey Basson, the chief executive of Shoprite, said the group’s core business, its supermarket operation in South Africa, increased sales by 8.4 percent and by 3.2 percent on a like-for-like basis.
Due to the continued weakening of most currencies against the rand, the turnover of the group’s non South African supermarkets in rand terms increased by only 3 percent and, on a like-for-like basis, by about 1 percent.
However, taken at constant currencies, a rand turnover growth of 13.5 percent was achieved.
Basson said the group’s furniture division grew sales by 4.3 percent during the reporting period as the furniture industry was hit harder by the economic slowdown than other areas in retail.
Marlo Scholtz, an equity analyst at Sanlam Investment Management, said Shoprite’s performance in the six months to December was in line with expectations of turnover growth of between 9 percent and 10 percent. “Given deflation it’s a very decent performance,” Scholtz said.
But it is evident that sales were somewhat slower in the last quarter of the calendar year. Shoprite previously reported that in the third quarter of the calendar year 2010 turnover rose 9.7 percent and yesterday reported turnover growth for the six months to December of 9.5 percent, suggesting that business slowed sharply in October and November before picking up in December.
Gilmour said Shoprite’s trading results in December were very much in line with expectations. “It’s not a bad performance at all.”
Gilmour said furniture sales through Shoprite’s division OK Furniture, which is a small part of group operations, was not as strong as expected compared to what other furniture retailers Lewis and JD Group had recently achieved.
Shoprite furniture division grew sales by 4.3 percent, whereas for the six months to September Lewis reported that its furniture and appliance sales rose 11.1 percent. In the year to August JD Group’s furniture retail division had an improved second six months with sales up 9 percent, but the annual performance was negatively affected by the poor 2009 festive season where sales were down 6 percent.
Gilmour said: “A year ago Shoprite’s furniture division was a very good performer when other furniture retailers were not doing as well.”
Gilmour said on the face of it seems that operations outside South Africa, which “were pumping two years ago” are not growing, but it is “purely an effect of the rand”.
Shoprite’s interim financial results are due to be published on 22 February. - Samantha Enslin-Payne