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Double-digit growth for Shoprite’s upper-market Checkers chain

While its mid-to-lower-end Shoprite and Usave see slower sales growth of 5.6%.
The entrance to the new-generation Checkers Hyper store at Centurion Mall. Image: Moneyweb

Checkers, the upper market grocery chain within Africa’s largest food retailer group Shoprite Holdings, has shown double-digit sales growth of 11.1% in the half-year to December 27, 2020, according to an operational update issued on Monday.

This is a positive sign for the retail giant, which is pumping significant resources into Checkers to take on the likes of upper market competitors Woolworths, Pick n Pay and to some extent Spar (the SuperSpar brand has some high-end stores).

Checkers’s new higher end ‘Fresh-X’ stores, such as those at Mall of Africa, Sandton City, and more recently Rosebank Mall, are creating something of splash in the market – as is the Checkers Sixty60 on-demand grocery delivery service.

The group’s major JSE-listed competitors are likely keeping a beady eye on these developments.

Read:

Traditionally the mega malls have been home to the group’s larger-format Checkers Hyper stores, which historically included the House & Home furniture section.

But Checkers has adapted to changes in the market, with a greater focus on fresh food and smaller destination stores that include pizza and sushi bars.

The new Checkers store at Hyprop’s Rosebank Mall even has an in-store Starbucks café, while the outlet at Liberty Two Degrees’ flagship Sandton City shopping centre received a long overdue overhaul last year. It has been converted from a Checkers Hyper to a smaller Fresh-X format.

Analyst’s take

“Yes, the top-line growth was marginally higher [11.1% vs 10.9%], but Shoprite did not give like-for-like nor price inflation data for Checkers,” Alec Abraham, an equity analyst at Sasfin Wealth told Moneyweb when asked about the growth of the Checkers chain.

“It is [therefore] impossible to determine whether or not they [Shoprite’s Checkers chain] bested Woolworths Food division’s 9.4% comparable store growth and 21% volume growth [for the same period],” he added.

Read: Woolies Food has a bumper festive season

Following Woolworths’s trading update last month, Abraham told Moneyweb that the Woolworths Food division is “in different league”. He said Woolworths Food has the most appealing offering, store shopping experience, convenient locations and increasingly improving price perception.

Shoprite’s latest trading update notes that the group’s core business, which is known as ‘Supermarkets RSA’ and contributes 78% to its overall sales, opened a net of 45 stores during the period.

However, it did not give a breakdown of how many of these were Checkers stores.

It said that Supermarkets RSA (which includes Shoprite, Usave and Checkers stores) achieved sales growth of 5.6%, while like-for-like stores sales came in at 4.8%.

Shoprite and Usave stores, which cater for the middle- to lower-end of the market, showed almost half the sales growth (5.6%) of its Checkers division.

Alcohol ban impact

Despite the growth in sales, its supermarkets were negatively impacted by the government’s Covid-19 liquor trading restrictions. The group pointed out that excluding its LiquorShop sales, Supermarkets RSA achieved sales growth of 7.8% and like-for-like sales of 5.7%.

“For the six months to 27 December 2020 the Shoprite Group increased total sale of merchandise by 4.7%, to approximately R83.4 billion,” it said.

“Excluding the impact of the closure of the RSA LiquorShop business due to Covid-19 lockdown regulations, the group increased total sale of merchandise by 6.3%.”

The group said sales within its LiquorShop business declined by 21.8% during the half-year.

“Due to the Covid-19 nationwide lockdown regulations, the group’s LiquorShop business was required to close for trade on Fridays and/or weekends and more recently, close completely,” it noted.

“The total number of days our liquor business was closed totalled 79 days over the six months: 60 days during the first quarter and 19 days during the second quarter.”

The group said its Covid-19-related costs for the period amounted to approximately R180 million.

This likely relates to sanitisation and protective equipment measures in place for staff, and related offers for its shoppers.

Rest of Africa

The group’s supermarket business in the rest of Africa performed poorly, only managing to increase sales in constant currency terms by 0.9%. In rand terms its non-RSA supermarket sales declined by 8.4%.

Shoprite blamed this on the “pre-existing challenges from a macro-economic and consumer affordability perspective” which were “exacerbated by Covid-19 and its associated lockdown restrictions”.

Its non-RSA supermarket business contributed 10.2% of group sales during the period and no new stores were opened.

Shoprite’s share price was marginally up (0.4%) on Monday, closing at R145.02. The group is set to publish its interim results on Tuesday, 16 March 2021.

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What is wrong with the share?

Even if the profits goes up by 50% the share price will drop by 1%

Share price used to trade around R180 and upwards.

Seems that someone is shorting the SHP share and retail investors need to do a Robin Hood on these short sellers and squeeze them out the market.

Similar punishment for Spar, reports a 9.8% increase in sales in 18 weeks.

Share gets punished and drops by 5.6%

End of comments.

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