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Shoprite lifts profit

As the retailer pours more capital into Africa.
Retail company Shoprite Holdings eyes rolling out more stores in South Africa and the continent.

Shoprite Holdings lifted its trading profit by 10.7% to R6.3 billion, as the retail heavyweight continues to grow its market share for the ninth consecutive year.

This is on the back of an increase in Shoprite’s turnover of 11.2% to R113.69 billion for the year to June 2015 from R102.20 billion in the previous year.

Its growth comes as Shoprite battles tepid economic growth and electricity constraints resulting in 139 000 hours of downtime across its stores. As Shoprite’s chief financial officer Marius Bosman puts it: “the macroeconomic factors of the market do not make for an inspiring story.”  

Despite this, Shoprite is forging ahead with store openings in South Africa and throughout the continent.  

Although Shoprite’s momentum has slowed down from a supermarket store-opening front, it spent R823 million in opening 49 stores in South Africa during the financial year. However, it spent more capital rolling out stores on the continent – to the tune of R1.1 billion – opening 23 stores in markets such as Zambia, Nigeria, and Angola.

In line with the group’s intention to grow its exposure on the continent, Bosman said Shoprite will continue to deploy more capital into markets outside of South Africa.  

It has committed about R1.29 billion to opening stores next year: R679 million locally and R618 million on the continent. The new frontiers Shoprite is earmarking are Madagascar, the DRC, and Uganda.

Its focus on expanding into the rest of Africa is supported by sales growth on the continent outperforming South African stores. Shoprite, the operator of brands such as USave, Checkers, Checkers Hyper and more, saw sales growth in African stores expand by 13.5% boosted by currency benefits in the dollarised economies it has exposure to. South African stores netted growth of 10.5%.

Despite Africa rising, Shoprite CEO Whitey Basson said the South African market is still attractive, given that the retailer has grown its market share by only 0.4% to 32.1%, as competitors Pick n Pay and Spar are aggressive in their growth ambitions.  

He added that it is difficult to grow beyond the 32% market share, as Pick n Pay is in a recovery mode. “We would rather keep the 32% and be at a stable level and be profitable,” Basson admitted.

“The customer seems to like what were are doing. About 32 million feet are coming into our stores and now 72% of all South African adults shop at our stores,” Basson said at an analyst presentation on Tuesday.  

Basson’s views are further supported by its food inflation figures. Shoprite’s internal selling food inflation was 4.6%, compared with the official rate of 6.8%, which he said is indicative of the company’s positioning as “the cheapest supermarket in South Africa.”

Shoprite’s LiquorShops was the star performer with 38% sales growth. Its furniture division with brands like OK Furniture, OK Power Express, OK Furniture Dreams and House & Home, saw sales grow by 13%. Bosman said the furniture industry is still reeling from the demise of Ellerines, which sold products at cheap rates to generate cash.

As Shoprite delivers on its targets, the company’s staff profile is increasing. During the period under review it created nearly 10 000 new jobs. Shoprite’s headline earnings per share rose 10.8% to 772.9 cents and it declared a final dividend of 243 cents per ordinary share.

Shoprite’s shares were up 2.15% to R160.21 at 12:45.

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